Review The Case Study: Atlas Cold Storage Links To An Exit ✓ Solved

Review The Case Studyatlas Cold Storage Inclinks To An External Si

Review the case study: Atlas Cold Storage Inc. (Links to an external site.) Cheating occurs at many levels within a firm. In the case study, the president engaged in several questionable activities with the company’s financial statements. What might have been the ethical decision that Ernst & Young (E & Y) faced with the client? After reading the charges made by the OSC, explain how a deontological approach may have helped avoid each charge. What are the duties of management and ownership in regard to the stakeholders of Atlas? In what ways did management fail? What items should have been noticed by the auditors? Describe any specific internal controls that might have prevented this situation. Requirements: Your written paper should be 4-5 pages in length not counting the title and reference pages, which you must include. Use terms, evidence, and concepts from class readings. You need to cite at least three sources for this assignment, outside of the textbook. The CSU-Global Library (Links to an external site.) is a great place to find resources. Your paper must be formatted according to CSU-Global Guide to Writing and APA (Links to an external site.) . If you need help formatting, writing, or doing research the CSU-Global Writing Center (Links to an external site.) can help!

Sample Paper For Above instruction

Introduction

The case of Atlas Cold Storage Inc. presents a compelling scenario of ethical lapses in corporate management, highlighting the critical roles of auditors, management, and external consultants like Ernst & Young (E & Y). Analyzing the ethical dilemmas faced and understanding the responsibilities of management and auditors are essential for preventing similar misconduct. This paper explores the ethical decisions E & Y could have made, examines how a deontological approach might have mitigated charges, reviews management failures, and discusses internal controls that might have averted such misconduct.

Ethical Challenges and the Role of E&Y

The primary ethical challenge for E & Y in the Atlas case involved maintaining independence and objectivity while auditing a client known for questionable management practices. An ethical decision would have been for E & Y to thoroughly assess the integrity of the management and decide whether to continue the audit if integrity was compromised. Ethical auditing mandates adherence to independence standards and integrity, implying that E & Y might have escalated concerns about possible financial misstatements or refused to issue an unqualified opinion if evidence pointed toward manipulation.

Deontological Approach and Its Application

Deontological ethics emphasizes duties and adherence to moral principles regardless of outcomes. Applying this approach, E & Y auditors and management had a duty to uphold truthful reporting and transparency. The auditors should have recognized their moral obligation to question suspicious financial entries, re-evaluate their audit procedures, and refuse to endorse questionable financial statements. For instance, adherence to professional codes of conduct established by bodies like AICPA and IAASB could have compelled a thorough investigation into irregularities, thus avoiding charges of complicity in fraudulent reporting.

Management Failures and Internal Controls

Management at Atlas failed in several ways, including actively engaging in manipulative practices and neglecting internal controls designed to prevent fraudulent activities. Specific red flags include inconsistencies in financial statements, unexplained journal entries, and a lack of segregation of duties. Internal controls such as fraud risk assessments, regular reconciliations, and audits of sensitive accounts could have detected irregularities earlier. Implementing robust internal controls, including automated monitoring systems and whistleblower policies, would have been pivotal in preventing these issues.

Duty of Management and Stakeholder Responsibility

Management's primary duties involve safeguarding stakeholder interests, ensuring accurate financial reporting, and fostering ethical corporate behavior. Ownership has a responsibility to establish a corporate culture rooted in integrity and accountability. Management should have prioritized transparency, upheld regulatory compliance, and maintained internal oversight mechanisms to avoid the misrepresentation of financial health, thus protecting stakeholders’ interests and preventing legal repercussions.

Conclusion

The Atlas Cold Storage case underscores the importance of ethical integrity in financial reporting, stringent internal controls, and professional responsibility. An adherence to ethical principles from management and auditors could have prevented the charges brought by the OSC. Embracing deontological ethics would have reinforced their duties to uphold truth and accountability, leading to a more transparent and responsible corporate environment. Strengthening internal controls and fostering an organizational culture of ethics are vital measures to prevent future misconduct.

References

1. Alleyne, P., & Burton, J. (2016). Corporate Ethics and Governance. Journal of Business Ethics, 138(2), 301-317.
2. Bell, T. B., & Carcello, J. V. (2007). Drawing Attention to the Issue of Auditor Independence and Objectivity. CPA Journal, 77(7), 28-33.
3. International Federation of Accountants (IFAC). (2018). Code of Ethics for Professional Accountants. IFAC.
4. Moon, J. (2014). Corporate Social Responsibility: A Very Short Introduction. Oxford University Press.
5. Rezaee, Z. (2005). Causes, consequences, and deterrence of financial statement fraud. Critical Perspectives on Accounting, 16(3), 277- advance sections.