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  • Molex

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    Yimin Jin
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    Molex, a public company, was required to hire an external auditor under the Sarbanes-Oxley Act. A financial reporting problem arose where Molex failed to properly record an inventory adjustment, understating costs. When the auditors discovered the error, management did not initially disclose it. The auditors were concerned about management's lack of transparency over what seemed a minor issue, as materiality depends on context. As the board oversees financial reporting, they would need to investigate and ensure proper controls to maintain auditor and investor trust.

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    Molex, a public company, was required to hire an external auditor under the Sarbanes-Oxley Act. A financial reporting problem arose where Molex failed to properly record an inventory adjustment, understating costs. When the auditors discovered the error, management did not initially disclose it. The auditors were concerned about management's lack of transparency over what seemed a minor issue, as materiality depends on context. As the board oversees financial reporting, they would need to investigate and ensure proper controls to maintain auditor and investor trust.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    71 views1 page

    Molex

    Uploaded by

    Yimin Jin
    Molex, a public company, was required to hire an external auditor under the Sarbanes-Oxley Act. A financial reporting problem arose where Molex failed to properly record an inventory adjustment, understating costs. When the auditors discovered the error, management did not initially disclose it. The auditors were concerned about management's lack of transparency over what seemed a minor issue, as materiality depends on context. As the board oversees financial reporting, they would need to investigate and ensure proper controls to maintain auditor and investor trust.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    Financial Reporting Problems at Molex, Inc.

    (A)
    1. Why do Molex have to hire an external auditor? - Hazel
    Molex has to hire an external auditor because under the Sarbanes Oxley Act, a public
    company can

    2. What was the financial reporting problem that arose at Molex? How would the
    correction of the problem be recorded in Molex’s financial statements? - Sheryl

    3. What factors do you think influenced management’s decision not to raise the issue
    with the auditors? - Hazel

    4. Why were the auditors so concerned by management’s failure to disclose what


    appeared to be a small amount in the management representation letter? What
    determines whether a financial reporting issue is material? If you were a member of
    the board, would you agree with their concerns? - Barrel/Yimin

    5. What is the relationship between management, the board, the audit committee, and
    the external auditors in financial reporting? What should the board do in this
    situation? - Ciki

    6. As a member of Molex’s board, what would you do respond to the auditor’s request
    that the CFO (and possibly the CEO) be replaced? - Angelina

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