Week 5 Discussion questions - Essay Example

3. I tend to agree with you that sometimes internal controls do not evolve fast enough. Sometimes a lack of compliance by a company exposes a firm tounnecessary risks. If the risks are not detected by the internal control mechanisms of a company a firm can get into danger of financial distress. An example of a company in which the internal controls where bypassed due to human override was the Enron case. The executives of this company masterminded a corrupt scheme in which they paid the auditors over $1 million in revenues weekly to keep the lie a secret.4.A company’s growth can outpace the established internal controls in place.

Sometimes management is naïve and they think that the same rules apply to a company in a large scale. With growth come a lot of hidden costs to monitor a larger operation. Enron was the largest energy producer in the world. The company got so big that a lot of lower level managers and accountants could not see that a huge scam was occurring right beneath their feet. I think that companies are more vulnerable to this phenomenon when they are in their early stages of development due to a lack of economic resources to implement proper internal control mechanisms. 5.I think that employee growth is often not managed well as company start growth.

For instances when a company has thousands of employees it become harder to implement control mechanisms to maintain a drug free environment because it is too costly to test all the employees. Firms can only implement random testing of a small population of the employees due to cost constraints. Sometimes firm underestimate the importance of experience and they hire too many college recruits at once. Bad management of human resources complicates human resource issues. 6.I believe that one of the biggest changes in the accounting profession is that accountants have become bigger assets of the managerial staff due to their ability to analyze business information.

The utilization of accounting information systems provides companies with precise up to date information that can be used to make informed business decisions. Technology has helped managers and accountants a lot. The accounting profession is changing in the United States due to the influence of new regulations that arrived in the 21st century such as the Sarbanes Oxley Act (SOX) of 2002. A branch of accounting that will grow a lot in the near future is auditing and forensic accounting. 7. Sometimes when companies begin to growth they don’t pay adequate attention to their inventory numbers.

This is an area in which for many companies the internal controls that are in place are virtually worthless because mangers do not think that fraud could occur from within. A corrupt warehouse manager could take advantage of these types of opportunity to defraud a company out of thousands of dollars in inventory without the company noticing. This course has taught me that sometimes companies have weaknesses in internal controls that they don’t even realize. 8.What you mentioned is extremely interesting since you were talking about gold.

In the 19th century we had the gold rush. The cowboys would kill for that precious metal during that era, but gold has been valuable forever. I like that you also mentioned how the price of gold has skyrocketed. It is truly amazing. A small investor tip is that silver is a better investment right now than gold. The historical ratio of value between silver and gold is 10:1. I’m not sure about the exact ratio right now but I believe is higher than that which means that silver is undervalued. 9.

I once worked in a company a few years ago where a lack on internal controls ruined the company. The firm was a new company, but they had a contract worth $10 million for a year from one of the most recognized companies in the social media game. The owner of the firm was stealing money from the start. He would pay the employees less than what the social media company had authorized for the services we were providing. I mentioned this case because I saw first hand what could happen when upper management is colluded. 10.In the business world sometimes companies do not do the right thing.

When this occurs the corruption more often than not start at the top. In all the big corruption cases of the 21st century such as Enron, WorldCom, and Tyco the problems started at the top. I sometimes think that the board of directors might not be doing their job adequately for letting these types of things to occur. SOX helped a lot because it created harsh penalties for violators. White collar criminals have to think twice before doing crimes for which they might receive 20 years of prison time.