AU 240
ACC 640: Advanced Auditing
Dr. Owhoso
Case 4: Waste Management
Due: 09/23/14
Summary: Waste Management, Inc. was an international provider of waste management services. What once started as a family-owned trash collection business in 1894 grew to be a leading company in the 1990s. The company had diversified into several waste-related ventures, including trash pick up for individuals, businesses, and municipalities, as well as recycling, methane gas removal, and portable toilet rental and cleaning. According to the 1996 financial statements, the company was under a tremendous amount of pressure from competing companies. This pressure from competition initiated a series of frauds on behalf of the top-level accountants and management personnel at Waste Management.
Top-level employees manipulated transactions and the financial statements to minimize expense recognition. This was accomplished through a variety of ways. These ways include: “Avoided depreciation expenses on their garbage trucks…, assigning arbitrary salvage values to other assets…, 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 unsuccessfully and abandoned landfill development projects, established inflated environmental reserves (liabilities)…, improperly capitalized a variety of expenses, and failed to establish sufficient reserves (liabilities) to pay for income taxes and other expenses.” (Beasley, pg. 106) The SEC determined that these fraudulent practices were executed at the executive level. These transactions were manipulated or perpetrated at company headquarters.
In order to prevent others from discovering these transactions, leading accountants at Waste Management used schemes such as “netting” and “geography”. (Beasley, pg. 107) In order to net their transactions, leading accountants would offset
Dr. Owhoso
Case 4: Waste Management
Due: 09/23/14
Summary: Waste Management, Inc. was an international provider of waste management services. What once started as a family-owned trash collection business in 1894 grew to be a leading company in the 1990s. The company had diversified into several waste-related ventures, including trash pick up for individuals, businesses, and municipalities, as well as recycling, methane gas removal, and portable toilet rental and cleaning. According to the 1996 financial statements, the company was under a tremendous amount of pressure from competing companies. This pressure from competition initiated a series of frauds on behalf of the top-level accountants and management personnel at Waste Management.
Top-level employees manipulated transactions and the financial statements to minimize expense recognition. This was accomplished through a variety of ways. These ways include: “Avoided depreciation expenses on their garbage trucks…, assigning arbitrary salvage values to other assets…, 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 unsuccessfully and abandoned landfill development projects, established inflated environmental reserves (liabilities)…, improperly capitalized a variety of expenses, and failed to establish sufficient reserves (liabilities) to pay for income taxes and other expenses.” (Beasley, pg. 106) The SEC determined that these fraudulent practices were executed at the executive level. These transactions were manipulated or perpetrated at company headquarters.
In order to prevent others from discovering these transactions, leading accountants at Waste Management used schemes such as “netting” and “geography”. (Beasley, pg. 107) In order to net their transactions, leading accountants would offset