Orlanes Jr., Joel M.

BSA-3201

Waste management Inc. Scandal

a.) Cite 2 accounting malpractice of Waste Management Inc. and what are their effects on
financial reporting? (10 pts)

Stagnancy of profit
Revenues were not growing as quickly as the company should have and when the
chief executives noticed the situation that is where they engage themselves in fraudulent
activities in order for their financial statements to reflect what they desired. So, it will affects
the totality of the financial statements just for the better financial exposure of the company

Reversal of Reserves into Revenue

Reversing funds from their savings and reclassified them as sales, an example of
'creative' accounting used to inflate profits. Reserves were manipulated so that the excess
reserves could be used to avoid recording such unrelated OPEX. In line with this, reserves
are recorded by debiting the retained earnings account then crediting the same amounting
to the reserve account. When the activity which caused the reserve to be created has been
completed, the entry should be reversed, shifting the balance back to the retained earnings
account.

b.) If you are the accountant tasked to book incorrect adjustments, what will you do? (5pts)

As part of the oath of service to the country as an accountant, it is my duties and

responsibilities to do what is right and better. Straight to the point, I will not the job for it is
part of fraudulent act. And if the higher management force me to do it, I will resign to the
job I have.

c.) If you are the audit staff who found the incorrect accounting practices what will you do?
(5pts)

As an audit staff who found incorrect accounting practices, I will consider the
implications for other aspects of the audit. If the resulting misstatement is not material to
the financial statements, I will refer it to the matter to an appropriate level of management
at least one level above those involved. For fraud that has a material effect on the financial
statements, it should be discuss the matter and any further investigation with an
appropriate level of management, determine its effect on the financial statements report it
directly to the audit committee and suggest the client consult legal counsel.