Sarbanes-Oxley Act and Embezzling Case Study
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1. Mary Soto, the controller of My Citizens Company, has gone over its inventory records many times and is concerned that one or more company employees has stolen large amounts of the company's inventory. However, she is not absolutely sure that any theft has actually taken place because large portions of the written and computer records are missing for unknown reasons. Still, rough calculations, based on total purchases and sales, show that perhaps 20% of the inventory is missing. Mary spoke to her internal auditors and demanded that they give her an explanation, but they said no explanation was possible without the missing records.
What should Mary Soto do? Should she contact the police? Should she hire an external forensic accountant? How might a forensic accountant help in this case? Specifically, what could that forensic accountant do that Mary's internal auditors could not do?
2. Section 404 of the Sarbanes-Oxley Act requires companies to perform self-assessments of risks for business processes that affect financial reporting. What are some business processes that could result in risks affecting financial reporting?
3. Explain how the concept of preemption applies when there is a conflict between local laws, state laws and federal laws.
4. Discuss the consequences of violating the Sarbanes-Oxley Act of 2002.
5. Why are the legal standards different for criminal and civil matters? Separately identify the differences between these two types of matters from the perspectives of the defendant and the plaintiff prosecutor.
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Solution Summary
This solution of 632 words analyzes the two case studies and answer questions on the scenarios based on the principles from the Sarbanes-Oxley Act.
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1. Mary Soto, the controller of My Citizens Company, has gone over its inventory records many times and is concerned that one or more company employees has stolen large amounts of the company's inventory. However, she is not absolutely sure that any theft has actually taken place because large portions of the written and computer records are missing for unknown reasons. Still, rough calculations, based on total purchases and sales, show that perhaps 20% of the inventory is missing. Mary spoke to her internal auditors and demanded that they give her an explanation, but they said no explanation was possible without the missing records.
What should Mary Soto do? Should she contact the police? Should she hire an external forensic accountant? How might a forensic accountant help in this case? Specifically, what forensic accountants can do that internal auditors cannot do?
Before contacting the police, mary should consult a forensic accountant as these specialists are able to detect asset-theft fraud while internal auditors ...
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