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ENVS201 Lecture 3: Week 3 Note(Sep 25)

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viridiancat835
6 Dec 2017
School
University of Waterloo
Department
Environmental Studies
Course
ENVS201
Professor
Alastair Neil Craik

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Document Summary

Who are the parties (other important people) How and why did these events lead to a dispute. What kind of a problem is it? (cause of action) Vast majority of legal disputes do not go to court . Resolve the particular disputes between the parties. Articulates an interpretation of existing legal rules to new facts and thereby generates a new, more precise rule . Each decision being shown to be consistent with earlier decisions by a higher or co- equal court. Equal parts moral intuition, hierarchical discipline and principled consistency. Follow: the rule from a prior case is accepted and applied. Overrule: the prior rule is not accepted and a new contrary rule is created. Distinguish: the prior rule is found to be not applicable due to differences in the facts of the prior case and the case under consideration.

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Related Questions

CASE DEBATE. Write down Background/Summary , Pro Highlights and con highlights ( Min 4 points for both Pro and Cos ) for topic INSIDER TRADING. Topic / Subject: Insider Trading Background/Summary: Pro Highlights Con Highlights Everyone would like to get a stock tip that will yield a huge return on a small investment. That’s human nature. But stock tips can be mixed blessings. Consider the following example: Dr. Sam Waksal developed a promising cancer drug called Erbitux. As the CEO of ImClone, Waksal was an entrepreneur as well as an immunologist. Waksal sold an interest in Erbitux to the pharmaceutical company Bristol Myers for $42 million. It was a Bristol Myers executive who informed Waksal that the Federal Drug Administration (FDA) was not going to approve the drug because there were insuffi cient data to determine its effectiveness; thus, new clinical trials were needed. Investors had expected approval, and once the FDA decision was made public, ImClone stock was certain to face a sharp decline in price. At least in the short term, some people were going to lose a lot of money. One of those people was, of course, Waksal himself. He had millions of shares of ImClone. So did his family. Waksal told his daughter and father to sell their shares. In addition, Waksal transferred 79,000 of his own shares to his daughter to sell. Waksal knew that it was illegal under federal law for him or his family members to trade on inside information. And in the end, all three were indicted and later convicted of violating federal security laws. Waksal was guilty of insider trading. As we pointed out in Chapter 1, insider trading results from information asymmetry, which arises when one party in a business transaction has information that is unavailable to the other parties in the transaction. To be legally actionable, insider trading must involve information that has not been publicly announced, as you might expect. In addition, the information must be material. Material means that the information will cause a significant change in the stock price—the price will go either up or down as a result of the event the information concerns. Examples of material corporate events include the introduction of a new product line, an acquisition, a divestiture, a key executive appointment, and thefailure or success of a product under development. Martha Stewart Enters the Picture Waksal’s conviction is not the only part of this story. Waksal was friends with the celebrity Martha Stewart, who also owned ImClone stock. On the day before the negative FDA announcement, Stewart sold 4,000 shares of ImClone worth $230,000. Did Stewart sell her shares on the basis of inside information regarding the FDA decision? Stewart’s sale certainly looked suspicious, and the Securities and Exchange Commission (SEC) started an investigation and asked her to explain her sale. In her discussions with the SEC, Stewart did not admit to insider trading. Stewart claimed that she had a prearranged order in place to sell her Im-Clone stock when it dipped below $60 per share. The stock did dip below $60 the day before the FDA announcement. Federal prosecutors, however, alleged that she and her broker, Peter Bacanovic, had doctored stock transaction records to support her story. In the SEC indictment, it was that they did not believe her explanation. It is also interesting to note that Stewart is not alleged to have received a tip from Waksal himself. Indeed, she contacted Waksal only after the sale, when she called him to ask what was happening to the company. However, it is alleged that her broker, Bacanovic, received a tip that Waksal and his daughter had placed orders to sell shares of ImClone. Martha Stewart was eventually convicted in a criminal trial, but convicted of what? The most serious charges, which involved securities fraud and insider trading, were thrown out of court. She was convicted only of lying to investigators. However, Stewart was also charged in a civil suit, and in that suit, the insider trading charge would have been allowed in court. After serving a jail term, Stewart eventually reached an agreement with the SEC to settle the insider trading accusations. Under the agreement, she had to pay $195,000, covering her gains from the trading and penalties, although she did not admit to any wrongdoing. Conclusions What can we conclude about insider trading? The ethical issues can be analyzed at two levels: At the institutional level, we can ask whether the insider trading laws are ethical. At the individual level, we can ask why a person would engage in this illegal behavior.

Need help with this article ( I'm working on a auditing case study)

PwC settles $5.5bn fraud detection lawsuit

Miami court case shone light on auditors responsibility to detect wrongdoing

PwC has settled a lawsuit brought against it over one of the biggest bank collapses in US history, in a landmark case that shone a light on the responsibility of auditors to detect fraud.

The world’s biggest professional services firm by annual revenues had been accused of failing to catch a multibillion-dollar conspiracy between executives at Taylor, Bean & Whitaker, a defunct mortgage lender, and counterparts at Colonial Bank, an Alabama-based lender that supplied TBW with loans. PwC gave the bank’s parent, Colonial BancGroup, a clean audit opinion for six years until it collapsed in 2009, when it emerged that huge chunks of its loans to TBW were secured against assets that did not exist. The plaintiff, the bankruptcy trustee of TBW, had been seeking $5.5bn plus punitive damages, in the biggest accounting negligence lawsuit ever to go to trial. The decision to settle — for a confidential sum — came four weeks into proceedings in a state court in Miami. “The case was settled to the mutual satisfaction of the parties,” said PwC. Steven Thomas, lead trial lawyer for the plaintiff, declined to comment on Friday’s settlement. But speaking broadly, he told the Financial Times: “The history that has happened here over the last few years, and the fallout of the Great Recession, has shown that what auditors do, matters. Auditors owe ultimate allegiance to the investing public; I think that is becoming more and more clear.” A separate lawsuit filed against PwC by the Federal Deposit Insurance Corporation, the regulator, and Colonial’s bankruptcy trustee is pending in Alabama federal court.


Mr Thomas’ team had claimed that PwC was in a position to catch and stop the fraud but missed multiple red flags. In its opening statements, PwC countered that no auditor can reasonably be expected to catch a well-organised and determined fraud. Mr Thomas had raked over what he had described as “the worst audit” he had ever seen, grilling the former lead audit partner at PwC over what he claimed were a series of lapses. Last week he produced a 2006 document in which a PwC representative — an intern — assigned to identify assets pledged as collateral for loans, reported back that she “felt” the collateral was “adequate”. The same report the following year, signed off by more senior staff, contained an identical paragraph. On Wednesday, Lynn Turner, a former chief accountant for the US Securities and Exchange Commission, opened up a new flank of vulnerability for PwC by saying that the firm had violated auditor independence standards that he himself had helped to craft.


Called as the third and final expert witness for the plaintiffs, Mr Turner said he believed that PwC should not have continued to audit Colonial in 2005 and 2006, after a senior manager who worked on those audits was hired by Colonial in a top financial oversight position. Mr Turner, who helped draft the Sarbanes-Oxley Act of 2002 after a wave of corporate scandals, said that PwC should not have cited an “emergency” exemption to standards banning accounting firms from auditing a company for a year after it makes such a hire. The ending of the trial does not end PwC’s legal challenges. The firm’s Brazilian unit is the target of an action in New York brought by the Bill and Melinda Gates Foundation, alleging that corruption at Petrobras, the state-run oil company, was “wilfully ignored” by its auditor. Back in the US, PwC is facing trial over its role in the collapse of MF Global, the futures brokerage, after a federal judge this month gave the go-ahead to a $1bn lawsuit over how it accounted for the European sovereign debt that tipped it into bankruptcy.

Nader Tavakoli, MF Global’s lead director, said the decision to allow the suit sent “a strong message concerning the need for responsibility and accountability”, and that he hoped to secure “a substantial recovery” for the estate. Last year, PwC agreed to pay $65m to settle a separate lawsuit claiming it failed to properly audit MF Global’s internal controls before its collapse.

1-Impact on stock price/shareholders/investors

a- In response to lawsuit/charges

b-In response to settlement

2- Implications for future or industry or auditors

a-Where other auditors affected by the lawsuit and settlement?

b-What does this mean for the future of auditing?

c- Other lawsuits?

GOOGLE: Morningstar® Document Research FORM 10-K GENERAL MILLS INC - GIS Filed: June 29, 2017 (period: May 28, 2017) Annual report with a comprehensive overview of the company​ FOR THE ANNUAL REPORT

Instructions: Use the financial statements from the annual report for the year ended 5/28/2017 for General Mills. The Annual Report is on MOODLE. Answer the questions after each question. Use a different font to distinguish your answer from the question. All answers should be in your own words. Do not cut and paste from the annual report. Answers will be graded for content and written communication skills. Use complete sentences.

*****MAKE A NOTATION HERE IF THE DOLLAR AMOUNTS ARE STATED IN MILLIONS.

1. Who are the external auditors for General Mills? What does their Report of Independent Registered Public Accounting firm indicate about the amounts represented in the company’s financial statements?

2. What specific title does General Mills use for its income statement? What type of income
statement does General Mills issue? (multi-step, single–step, or condensed multi-step)
Explain.

3. Did they disclose EPS as discussed in class? Explain. What about the EPS presentation
did we not discuss in ACC 3100?

4. How does General Mills define Cash Equivalents? Is this consistent with the textbook?

5. What is the amount of cash and cash equivalents reported for the year ended at May 28, 2017 and for the year ended at May 29, 2016. By how much has cash and cash equivalents increased/decreased? Show calculations.

6. Create a table illustrating the amount General Mills reports for net cash flows from operating, investing, and financing activities in its statement of cash flow for the year ended May 28, 2017. (Note: Include any effect of exchange rates on cash.) Show calculations. Compare your answers to question 5.


7. What amount is the balance in the Allowance for Doubtful Accounts at 5/28/2017? How is the estimate for Allowance for Doubtful Accounts determined?

8. What was the gross balance of trade receivables at 5/28/2017? What was the dollar amount of bad debt expense for the year ended 5/28/2017? How many accounts were written off (Dollar amount)?

9. What inventory method is used to value inventory in and out of the US?

10. What is the balance of their LIFO reserve account 5/28/2017?

11. What impact (dollar amount and increase or decrease) did the LIFO Reserve adjustment have on Cost of Goods Sold?

12. Which depreciation method(s) is used for PP& E? What estimates are made for the useful life of the different categories of assets?

13. What was total depreciation and amortization expense fiscal year ended 5/28/2017? Where were these amounts reported in the financial statements?

14. What was the major component of total PP&E? What was its amount and what percentage was it of the total for the year ended 5/28/2017?

15. What percentage of total PP&E has been depreciated as of 5/28/2017?

16. Did General Mills capitalize any interest in the fiscal year ended 5/28/2017? If so, what was the amount?

17. Did General Mills dispose of any property and equipment during the year ended 5/28/2017? If so, what was the cash proceeds?

18. Did General Mills issue more new long term debt than they paid in long term debt payments for the year ended 5/28/2017? Explain, show amounts.

19. Create a table to show the components of Comprehensive Income that was attributable to General Mills for the year ending 5/28/2107?

20. Create a table to show the components and amounts of General Mills’ Accumulated Other Comprehensive income(loss) for the year ending 5/28/2017 and 5/29/2016?

21. When does General Mills review impairment for long-lived assets? What is their measurement of an impairment loss based on for long-lived assets?

22. What is the amount of General Mills goodwill? Did General Mills have an impairment loss on Goodwill during fiscal year ended 5/28/2017? What are the standards for testing goodwill(How often and how is it tested)?

23. List any other indefinite life intangibles? How much was the impairment loss General Mills recorded for fiscal year ending 5/31/2015 and why was impairment indicated?

24. The Financial Accounting Standards Board (FASB) issued two new accounting requirements in 2017 that were mentioned in General Mills’ annual report? What are the standards and what is the expected impact of these new standards to the financial statements?

25. General Mills uses the three-level fair value hierarchy for disclosure. What level are the majority of their assets and liabilities measured at 5/28/2017? According to your textbook, how is this level defined?

26. When does General Mills recognize revenue? Do they handle consistently with the material presented in ACC 3100?

27. What was General Mills’ current ratio and working capital as of 5/28/2017? Show calculations.

28. Is the Statement of Changes in Stockholder’s Equity (Consolidated Statements of Total Equity, and Redeemable Interest) consistent with what we learned in class? Explain-indicate similarities and differences.

29. According to the MD&A (begins on p. 15) did General Mills’ Selling, general, and
administration expenses increase or decrease in fiscal year ended 5/28/2017? What was
the primary reason for the change?

30. In two detailed paragraphs, indicate a couple of interesting items you learned while
reading this annual report.