Ben Davis is an Accountant at Solway Inc., a publicly-owned company headquartere
ID: 2594975 • Letter: B
Question
Ben Davis is an Accountant at Solway Inc., a publicly-owned company headquartered in Austin, California. Ben reports to Chris Hodgins, the Controller of the company. Hodgins reports to the Chief Financial Officer, Harry Benson. Benson reports to George Lee, the Chief Executive Officer. Solway has a three-person independent Audit Committee that deals with financial oversight issues including being a direct access group for matters of concern for the chief Internal Auditor, Sam Vines. On January 15, 2014, Hodgins told Davis to record an accrual for unpaid bonuses and severance payments of $50 million in the December 31, 2013, financial statements. Hodgins explained that this unusually high amount was for the planned shutdown of a division, one of the five divisions, in 2014 and the severance payments would be significant. This was the first time Davis heard about a shutdown of any division and he found it strange because the operating incomes in all five divisions were excellent in fiscal year 2013. Moreover, the bonus and severance amounts are five times the annual payroll of that particular division. The numbers below show the operating income levels and accruals for 2011 through 2013: 12/31/11 $100 million S 10 million 12/31/12 $120 million $ 12 million 2/31/13 Operating Income $200 million Accrued bonus & severance Before recording the accruals, Davis wanted more information and opinion about the situation. At that time, Hodgins was away on an urgent matter for a few days bringing their meeting to an abrupt halt.Explanation / Answer
(a) It is consider as event occuring after balance sheet date thus accounted accordingly complying with the accounting standard.
(b)(i)Stake holder in this case is Employee of the company
(ii) Accounting Such a large amout of bonus not only create a doubt but also question the genuinity of transaction
(iii) The Accountant should act as Whisleblower to point out the issue to concerned authority.
(c) (i) I should first try to contact to Mr Hodgins if it is not possible then i first consult the matter with Mr Harry Benson and then take decision
(ii) If i find it very suspicious the i will go for Whisleblowing
(iii) Being an accountant i am acting on behalf of stakeholder thus i should act in the interest of them
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