Smokey The Bear Case Study
Tony Menendez was an auditor with Ernst & Young before he began working for Halliburton as their Director of Technical Accounting Research and Training in March 2005. He was told by his new boss, Mark McCollum, the Chief Accounting Officer, that he was needed to be the “Smokey the Bear” in the accounting team (Eisinger, 2015). They had just gotten over a two-year accounting probe from the SEC shortly before Menendez was hired and he was supposed to do an assessment of the financials and accounting of the company and report his findings.
Shortly after arriving there he quickly learned that Halliburton had serious accounting issues regarding joint venture and the revenue recognition of “bill and hold” sales transactions. He had written off two joint ventures that seemed to have no basis to them. The SEC says that a product needs to be delivered to the buyer or a service should be …show more content…
During this meeting, Menendez secretly taped the conversation. While they all agreed with his findings, they found that his approach was all wrong. McCollum said that their auditors, KPMG, had come to a different conclusion. One wonders why, as they were being paid to come to the same conclusion as Halliburton. McCollum had the gall to ask Menendez if KPMG somehow was smoking dope when they came to that conclusion. “Yes, they could have.” But, then he said that Menendez needed to make sure that he fits within the politics of the company. That he had to be delicate while using emails and other forms of communication to everyone in the company (Eisinger, 2015). The only way to fix this would have been to do a restatement and that would mean that the stock prices would plummet. They were not willing to do that, stating that it was too big of a problem to fix. Even Menendez’s friend, John, who worked at KPMG said that this was not right (Yemma,