Weston Smith
Courtney Bouchez
ACC 4313
9/4/15
W. R. Grace vs. SEC
W. R. Grace trouble all started in the early 1990’s. W. R. Grace is a catalyst manufacturer, they specialize in petroleum refining and chemical processing catalysts. The relatively successful company had run into some unexpected spike in profits. The executives knew that they could not keep up this growth and eventually the profit would decrease again and investors would be concerned. So instead they decided to take the 30% growth and stash it in a secret fund, they participated in profit management. The way W. R. Grace justified this was they decided it was immaterial and it would not influence the investor’s decisions. PwC, an external public auditing firm came into W. R. Grace to do their annual report, while going over the numbers they discovered the hidden profit. PwC repeatedly told W. R. Grace that it was wrong, and mentioned it in their memos, but ultimately gave W. R. Grace a clean report, and signed it. Mr. Eatough the company 's, internal audit chief …show more content…
Grace case are 2060: Reporting to Senior Management and 2440: Disseminating Results. 2060 discusses the requirement of the chief audit executive to “include [all] significant risk exposures and control issues, including fraud risks, governance issues, and other matters” when reporting to “senior management and the board (Textbook).” Mr. Eatough purposefully evaded reporting an issue of fraud by downgrading the severity of the company’s situation and avoiding the use of the word fraud altogether in his final report to the CFO. 2440 requires the chief audit executive to essentially approve “final communication” at the end of an “engagement” and “deciding to whom and how it will be disseminated (International).” These two specific standards were chosen because Mr. Eatough directly and completely violated both when he simplified his report on fraud to the