Accounting Rules Of KPMG In The Halliburton Case

Improved Essays
1. Identify accounting rules of revenue recognition and describe the inadequacies in accounting context of using bill-and-hold to recognize revenue at Halliburton.

According to the accounting principle revenue recognition, it is the function when revenue is reported and recognized when a function has occurred. Under GAAP, revenue recognition should recognize a measurable amount of revenue once a certain transaction has been fully made. That would be the case, when certain types of goods or services are being transmitted to a consumer, and a certain amount of revenue is entitled to the company in charge of delivering such package. Therefore, there are accounting rules that highlights the certain fact that there should be revenue recognized
…show more content…
KPMG was in charge to keep the interests of the shareholders well protected. Independently, Halliburton’s external auditors, KPMG should have taken into consideration the audit of the entire company. Any unethical or fraud founded should have been sent to the management. These slight events would have prevented any unethical situation from occurring at the end. However, the external auditors didn’t commit to it, and failed to keep the ethical environment and its corporate governance in Halliburton. Menendez, the whistleblower wasn’t included in the important meeting that Halliburton arranged. Throughout the meeting, KPMG was present without the employee Menendez. This meeting held the fact that there would be an accounting topic of a joint venture. However, SEC would find reasons in awkward situations considering KPMG and why they shouldn’t have had been in the RTA meeting consulted by Haliburton. KPMG’s profession and influence can impact the way that the shareholders’ opinion can react up at the end. The firm’s actions related towards the ethical expectations would lead those accounting individuals which were part of the audit meeting to have a violation with the relationship between their clients. Halliburton let the whole policy of revenue recognition against GAAP slip through time. This accounting profession would alert many professional CPAs. KPMG had a duty to fix anything wrong that would go …show more content…
Having corporate governance at its best throughout the company is to have a high set of standards for the shareholders. It simply describes how the specific management must set order and professionalism towards the shareholders of the company. Therefore, Halliburton’s corporate governance was in need to keep honest financial calculations and information to their overall investors and shareholders. To begin with, Halliburton financial information didn’t meet the requirements nor follow GAAP. Having a set of rules and policies that doesn’t follow GAAP would then question the shareholders to rely on such a big company like Halliburton. Halliburton would simply adopt a revenue recognition policy in which would permit the system to commit overstatement of revenue by recognizing certain amount of revenue before it had occurred and been truly earned. Another inadequacy in the corporate system would be the fact of having a weak whistle blowing policy. Many of its employees were in fear of committing the whistle blow, since their confidentiality wasn’t well protected and there were chances of retaliation from Halliburton. The last inadequacy I would describe would be the fact that there should have been a better working environment around Halliburton. To keep fraud away, Halliburton’s auditors and the rest of the committee should have a positive relationship between each other. The

Related Documents

  • Improved Essays

    As a result, the auditors ensure that they determine the reasonability and integrity of the management team during review of their assumptions and validation of accounting estimates. Alternatively, there are criminal and civil liabilities plus penalties for those corporations and their auditors who fail to act accordingly. The forms of punishments are economic, legal, and political costs. The second factor is the client’s preferences since the auditor’s wealth is dependent on their customers (Allen, Ramanna, and Roychowdhury 2014). The company’s executives make decisions to keep or fire the auditors, and therefore, the auditors firm may act in an unethical manner to maintain the client as a customer.…

    • 997 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    One section of the Act, Section 302, it clearly states that the CEO and CFO must review the financial reports and ensure that the figures and accounting principles are correct and efficient (Johnson, 2009). This section makes the appropriate people truly look at the company numbers and sign off on them before they are sent to the company’s investors. If the CEO and/ or the CFO review the documents and notice that there are accounting errors and refuse to make the changes, then they are as much as fault as the people who committed the error. If accounting errors go unnoticed and the top management approves them, then they could be charges with serious penalties which are outlined in Section 906. Section 302 of the Act ensures that the right people will review the documents and identify areas of concern before the investors and stockholders receive the…

    • 1303 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    When individuals pull responsibility from themselves, they often do things that are questionable for the better of the company. For instance, the individuals that made decisions on behalf of the fallen company Enron, likely made decisions behind the veil of the corporation; furthermore, those decisions negatively affected those that invest in the company and those that worked there. There are many insights gained by looking at Enron such as the vital role that top management leadership plays in the organizational culture. Ethics and ethical behavior in accounting, financial planning, and the decision-making process are used to ensure adherence to standards and practices. It shows that the best ethical behavior is to follow the International Accounting Standards.…

    • 777 Words
    • 4 Pages
    Improved Essays
  • Decent Essays

    Unethical Legal Issues

    • 786 Words
    • 4 Pages

    When acting unethical in a business there is a number of things that can go wrong. One result could be legal issues depending on how the action was commenced and the effect it had on the people around it. Legal issues on social media these days is really bad for business and will most certainly have a negative effect on your company. There are also fines in place if the government was to find out that there is such legal issue going on inside your company. Another effect is how such act makes the company looks towards to public.…

    • 786 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    There is a fair amount of blame to be spread around for the collapse of Enron • Arthur Andersen – Allowing the fees to cloud their professional judgement. To allow for questionable and complex accounting practices to continue via the SPE’s. Also, the destruction of Enron audit documents • Enron – Kenneth Lay/Jeffrey Skilling – The emphasis that was placed on a big profitable bottom line to increase the value of their company and their direct reward for such profits. They discounted the loyalty and the harm that it would have when the scandal began to unravel would have on their employees. • SEC – Lack of oversight at the time to allow for these type of activities to occur.…

    • 824 Words
    • 4 Pages
    Decent Essays
  • Improved Essays

    Similar to the analogy above, Ebber was similar to a dictator. His resistance is what led to the buying out of the company. Another potential cause of poor decision making is being not well informed. If he were to be open to new ideas and the truth from his employees, he may have corrected the situation years before he gets indicted with charges of fraud, conspiracy, and false…

    • 1042 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    Q10, Q15, Case 4-3 Q10. The ethical issues that should be considered before deciding whether to hire the controller of a client is that they need to make sure that the controller is reliable because this may lead to possible threats to independence to the firm . Hiring them is going to make the firm not independent and this would increase risk to the company as well. If hiring the controller then they would know everything about the firm and this can expose them to information that they are not supposed to know. Overall, this would not be an efficient idea to allow the controller to do tax duties for the clients because then the information would not be held confidential for the firm.…

    • 1007 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    Independence In Auditing

    • 1290 Words
    • 6 Pages

    This falls in line with the advocacy threat which will make the auditing firm not independent as it is in their self-interest as well that the client does well so the client keeps their consulting portion as well. This was a significant portion of frauds such as Enron which later caused regulation with the Sarbanes Oxley Act in 2002. Finally, auditors cannot provide management functions1. This would not allow the auditor to be objective and there will be a bias towards the client in this…

    • 1290 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    Companies employing this theory of governance shareholders hire Chief Executive Officers (CEOs) and “incentivize [them] to adequately monitor their output and motivate superior performance” (Martin and Butler 2017). One major role for agents and principals operating under this theory is to align their goals to avoid conflict; however, when they do encounter conflict the goal is to resolve differences to avoid risking the company. Benefits of the agent theory are the incentives that CEOs are offered. These incentives aid in avoiding CEOs from “engaging in shirking behaviors” (Martin and Butler 2017) since they are receiving financial kickbacks. There is a whole host of instances where CEOs have embezzled large sums of money from their companies for their own financial benefit.…

    • 863 Words
    • 4 Pages
    Improved Essays
  • Superior Essays

    Confidentiality: An accountant should not disclose confidential information of his clients to third parties without a professional or legal reason to take such step. 5. Professional Behaviour: An accountant should not involve himself in any act that dishonours his profession and ought to obey the rules and regulations established. Why Accountants act Unethically? There can be numerous reasons as to why accountants act unethically.…

    • 970 Words
    • 4 Pages
    Superior Essays