PAS 3143

AUDIT & INVESTIGATION

BACHELOR OF ACCOUNTANCY
FACULTY OF BUSINESS AND ACCOUNTANCY
SEPTEMBER 2017 SEMESTER, 4/17/34 ACADEMIC SESSION
WASTE MANAGEMENT SCANDAL 1998

SITI NABILAH BINTI KHAIRUDIN 4141005891

FAIZAHTUN NAIMAH BINTI ROJIKIN 4134004391
AMIRAH BINTI ADAM CHEAH 4141004211
SITI HAJAR BINTI MOHAMAD AZAM 4135001771
IZZATI HAZIRAH BINTI MOHAMAD MASTAM 4151002581
NUR NAJLA ATHIRA BINTI NOR RAHIM 4151006611
NURUL AIN SYAFIQAH BINTI ANUAR 4135003181
NOR AZIANA BINTI SHAFIE 4151006591
NURUL FATIHAH BINTI LATPI 4151004431
NUR FARAERYNI BINTI ZAIDI 4141003951
SHAFIE BIN SEDIK 4151001241
 The company used improper
accounting to inflate its
operating income and other
measures of success

The company
Andersens issuance admitted that
of materially false through 1996 it had
and misleading audit materially overstated
reports on Waste its reported pre-tax
Management earnings
 Arthur
Anderson
Koenig Hau
(Auditor)
(Vice (Vice
President) President)

Rooney Tobecksen
(President) (CPA)

Getz
Buntrock (Senior Vice
(Chairman) President
Finance)
 Arthur Anderson
(Auditor)

Founder of one of Big Five accounting

firm

As an external auditor for Waste

Management Incorporation since year
1971

He issued a false and misleading

unqualified audit reports on the
company annual financial statements
 Dean L. Buntrack Phillip B.Rooney James E.Koenig
(Chairman) (President) (Vice President)

Founder and CEO of COO of Waste CFO of Waste

Waste Management Management Management
Incorporation Incorporation Incorporation

The driving force behind In charge of building Primarily responsible

the fraud
Presented himself as a
pillar of the company
Fostered a culture of
fraudulent accounting
the profitability of the for executing the
company scheme
He overruled Profitable more than
accounting decision $900,000 from his
that would have a fraudulent acts
negative impact on
operations
 Herbert A. Getz
Thomas C. Hau Bruce D. Tobecksen
(CPA) (Senior Vice
(Vice President)
President Finance)

CAO of Waste Vice President of General counsel of

Management Finance of Waste Waste Management
Incorporation Management Incorporation
Incorporation
Principal technician for He supported the act
the fraudulent accounting Act as Koenigs right- of scheme
hand man
Profitable more than Profitable more than
$600,000 from his Profitable more than $450,000 from his
fraudulent acts $400,000 from his fraudulent acts
fraudulent acts
 Issue (1)
Issue (2)
Fraudulent activities
Andersons did not
involving the
perform his duties
companys
as an auditor
accounting books
Issue (1) : Fraudulent activities involving the
companys accounting books

Depreciation or salvage value adjustment

Failed to record expenses for decreases in the

value of landfills as they were filled with waste

Refused to record expenses necessary to write

off the costs of unsuccessful and abandoned
landfill development projects,

Environmental remediation reserve

Issue (2) : Andersons did not perform his duties as
an auditor

Did not properly audit the Waste Management

Incorporation accounting books

Accepting the gratitude and made decision

influenced by internal parties related with Waste
Management Incorporation

Having a cozy relationship with the top

managements and prioritize his own self-interest
14
 Andersen knew or was reckless in not knowing that the unqualified audit
reports that it had issued were materially false and misleading

In the Restatement, the Company admitted that it had overstated its net
after tax income as follows:
Waste management itself paid 457 million fine
to settle charge of violating securities laws with
USA waste service.

Firm fines charged by SEC -In June,

Arthur Andersen (company) agreed to pay
a 7 million civil fine after the Securities and
Exchange Commission accused it of
knowingly or recklessly issuing false and
misleading audit reports for waste
management for the years 1992 until 1996
amounted almost 1 billion and more.
 Individual fines charged by SEC - Civil fraud suit against three Andersen
partners who are involved in the audit of waste management

(a) Robert F. Allgyer as marketing director for Andersens Chicago

(b) Edward G maier as partner at Arthur Andersen

(c) Walter cercavschi as partner at Arthur Andersen

(d) Robert G.kutsenda as audit practice director in charge of Andersen,Chicago

 Management
Stakeholder
Restructure

The Company Audit Industry

 Management
The Company Stakeholder Audit Industry
Restructure

The company The previous Employees moral The fraudulent

profit is being CEO and top value is being action has
affected due to a managements affected due to the tarnish the
huge cost being that involved fraudulent action of public view of
incurred with the case top management Big Audit
being terminated Industry
The issue arise Investor lost the
give an impact The new CEO trust and having a The fraudulent
toward company being appointed negative perception action has
market and new system towards the tarnish the
performance being introduce company due to the image of auditor
fraudulent action of from Big
top management Accounting Firm
 Arthur Anderson
(Auditor)
The Employee
U.S. Securities
of Waste
and Exchange
Management
(SEC)
Incorporation

Dean L.
Buntrack & Top Audit Industry
Management
 The Employee of Arthur Anderson
Dean L. Buntrack &
Waste Management
Top Management (Auditor)
Incorporation
Unethical behaviour Perform duties Dont misuse the
by committing fraud ethically rights as an auditor
on its own company
Make a report if Perform duties
Should not have detect any ethically
special relationship suspicious action
Avoid self-interest

U.S. Securities and

Exchange Audit Industry
(SEC)
Tighten the Image of industry
enforcement actions might be tarnish
against the violation
of the securities laws The client/company
might lose trust
 Reduce the
pressures that
encourage financial
The BOD needs to statement fraud
appoint a different Reduce the
external auditor opportunities
every year in order employees see to
to avoid any cozy commit fraud
relationship occur

By hiring a new
management staff
will provide Reduce the
opportunity for the rationalization of
company to take an fraudulent actions
action in order to
protect itself
Act as a continual reminder to both regulators and accounting firms of the importance of
corporate governance, integrity and strong corporate culture within the accounting field

Ethical misconduct causes loss to the public image

Accounting ethics is significant not only for everything and everyone in the company but
also for the society

Placing huge profits ahead of ethics and laws is unreasonable action