Walmart Internal Control Violations

Superior Essays
Internal control violations
There was a total internal auditing division violation of the regulation in the K-Marts case. When the disproportional asset inflation was seen in the company revenues, it should have been immediately reported to the SEC and other concern authorities, but it was not done. In fact, the amount inflated was almost 10% of the total revenues are the inflated revenues. Therefore, internal control mechanisms of Kmart should play the role of the whistleblower policies. The critical and unbiased internal audit should have been worked on to forbid persons making false allegations; they should have informed the concerned people and the agents about the false consequences that would happen in case of false allegations.
There
…show more content…
If it was done, there should not have been bankruptcy and other events leading to the closure of the company. SAS99 insisted on the consideration of the fraud in a financial statement audit but does not require it to occur in the statement. It is required as per the part of the protocol; the internal auditors should show sufficient professional expertise in critical evaluation of the financial statements and with skepticism. SAS 99 emphasizes that the internal control mechanism and the auditors should take risk of fraud, and should adapt the audit based on the skeptism and the findings. The mechanism of noticing the fraud detection hotline is absent in the Kmart.
Accounting issues and impacts
The actual scandal of the Kmart can be classified as an issue of recognizing the allowances prematurely on the basis of false information provided by the company’s accounting department. The number of vendor representatives co-signed the false and the misleading accounting documents and provided the false or misleading third party confirmations to Kmart’s independent auditor.
As a whole, the inflated revenues of the company increased the stock value of the company shares in the market falsely. The internal control mechanism of Kmart did not evaluate the possible scandal in the financial statement of the company neither did it flag the issue. However the business failed in short time and ultimately caused
…show more content…
The company has closed a number of unprofitable stores as well as lay off a number of workers from the company. A number of customers across the nation reduced their spending in Kmart and at the same time the rivals of Kmart like Wal-Mart stores and Target started siphoning off the customers of Kmart. K-Mart merger with Sear Roebuck and Co in 2004 to produce Sears Holdings Corporation has become inevitable. The intention in making the merger is to create a much broader retains presence in the country and to make improvements in the operational domain of the retail chain. The merger resulted in formulation of hybrid store called Sears Essentials. This off-mall approach is formulated as a combination of the Sears and K-Mart’s. It is expected to become more popular but it did not happened like that. Finally Sears announced that it will finally implement a new store termed as Sears Grand.
Conclusion
Kmart being a giant in the retail marketing has failed miserably due to the incompetent management strategies and by incompetent mangers without vision. In fact the company should have used its advantages for better marketing and reorganization of the business strategies. The company should have tried to improve the employee – customer relationships. It should have focused more on the diversity of the customers and taking advantage of the diversity in its products and promotional

Related Documents

  • Improved Essays

    Sears Case Study Essay

    • 1801 Words
    • 8 Pages

    Sears has failed to meet customers’ needs and wants by failing to innovate their line of products outside of appliances which ultimately has led to the loss of customers. This would increase profitability in the long run as they would stop losing money on merchandise customers no longer…

    • 1801 Words
    • 8 Pages
    Improved Essays
  • Superior Essays

    From the time they started issuing the bribes, they knew they are doing something unlawful. Consequently, although the theory would support the idea that they may have harmed people in order to maximize profit and expand its business, individualism concept will not support them in this case because they achieved profits through illegal practices. On the other hand, these bribes did not only harm people of the communities but it as well has a negative impact on the company 's image. Being that Wal-Mart is among the largest corporation across the globe, this scandal will not only affect the de-Mexico subsidiary, but also all companies across the globe. Therefore, the profit maximization theory would argue that it is a horrible choice to pay off their way, as they will lose the profit.…

    • 1615 Words
    • 7 Pages
    Superior Essays
  • Improved Essays

    I believe that the auditors in this case, Ernst & Whinney, should have great blame in not having the sufficient information and knowledge to fall into the pressure of the bribes committed by Minkow and analyze the fraud that was occurring. The upper management in ZZZZ Best made the financial information seem perfectly fine, therefore the auditors were unable to identify any miscalculations that would then lead to fraud. Minkow and his company for years kept on staling the fact that his insurance business had an actual positive cash flows system occurring. This would keep the auditors from seeing the main problem concerning the fraud that was started from the very beginning by Minkow and his carpet/insurance business. As this wasn’t enough fake information conducted by…

    • 1404 Words
    • 6 Pages
    Improved Essays
  • Improved Essays

    The investor would have to prove that they relied on the information but they don’t have to prove that it was the defendants fault. The defense for this would be good faith (acting without scienter)that I had no knowledge that the statement was false or misleading. I had no idea about the overstating of the net sales and net profits or the siphoning of profits by the company President, but he did notice suspicious entries he believed to be bribes that he didn’t investigate further. (Mallor, 2010, p. 1202) b. Reginald Varghese would not be found liable under Rule 10b-5 of the Securities Exchange Act of 1934 act. Rule 10b-5 bars any person from making a misstatement or omission of material fact in relation to the purchase or sale of any security.…

    • 1799 Words
    • 8 Pages
    Improved Essays
  • Improved Essays

    The fact that company allowed and promoted to their clients a portfolio they believed would fail, and did not share this information with their clients pose a question mark on the ethical aspect of its behaviour. The banking sector is considered to play a key role in economic development. It helps to translate someone’s savings into someone’s investment. Thus, the money involved in the Abacus deal, i.e., the money put in by Paulson, IKB and ICA should have been invested further to spread the benefits across all parties that were involved. But the deal only focussed on benefitting Paulson and everyone else was left empty handed.…

    • 881 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    Auditors are therefore required to feature professional skepticism as it ensures due alertness to the processes at the company hence avoid cases of fraud. Red Flags of Fraud The auditor will follow given steps in order to establish whether or not there is a case of fraud in the operations. The auditor will look for the red flags, which are indications in the event that there is a case of fraud within any given organization. The red flags that the auditor will look for are Managements ' characteristics and influence • Financial actions that are noticeably aggressive by the management • Flaws in the characters and personality of the top management officials such as the CEO • Efforts by management to conceal given financial…

    • 1728 Words
    • 7 Pages
    Improved Essays
  • Improved Essays

    Independence In Auditing

    • 1290 Words
    • 6 Pages

    Independence is a critical element CPA’s must consider while completing auditing services for clients. The importance stems from the basic purpose of auditing. To provide an expression of opinion on the fairness of the presentation of the financial statement requires the auditor to be independent both in fact and in appearance. In terms of independence in fact, an auditor should not own stock in the company which he or she is auditing. If the auditor recognizes that the company did not have a strong year, the auditor could sell his or her stock before the public has that knowledge.…

    • 1290 Words
    • 6 Pages
    Improved Essays
  • Great Essays

    Barings Bank Case Study

    • 1619 Words
    • 7 Pages

    Barings top management less familiar business proprietary problem (transaction for his own interests). If Barings Auditors and top management understands the business of trading, they would know that it is impossible for Leeson obtained a profit of which he reported, if not taking greater risk anyway. And of course top management and Auditors questioning where the origin of the spider. Lack of knowledge about the trading Barings business is indeed justified in considering the most senior Barings managers have a background of merchant banking. The members of the Assetand Liability Committee (ALCO), which monitors market risk, stated it's a matter of quantity of positions taken Leeson, but later felt comfortable with the thought that eksposure Barings over market risk is relatively small because Leeson over the hedgethe position.…

    • 1619 Words
    • 7 Pages
    Great Essays
  • Improved Essays

    They want to see how much they can get away with without having to hire someone else" (Olsson 607). One can get an understanding of what a certain company is like just by talking to the employees. Here is a prime example of how Wal-Mart is disregarding personal ethics to make a profit. While there is always the option of just searching for a better job, many are not even be qualified to do…

    • 825 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    In his article, Dicker brings up many well-grounded points about how robust Wal-Mart is. It is no doubt that Wal-Mart is not just a store. However, is that such a bad thing? Without Wal-Mart, there would not only be an increase in unemployment rates but also an absence of a popular shopping center utilized by countless consumers. Dicker manipulates many statistics about Wal-Mart and completely ignores any of the benefits that come out of this huge corporation.…

    • 1153 Words
    • 5 Pages
    Improved Essays