Cardillo Travel Systems case; 4-5 page paper

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Xvzoer17

Business Finance

Description

Write a four to five (4-5) page paper in which you:

1. Explain the Securities and Exchange Commission's rationale to charge Cardillo executives with each of the following violations:

    1. making false representations to outside auditors
    1. failing to maintain accurate financial records
    1. failing to file prompt financial reports with the SEC
    1. violating the insider trading provisions of the federal securities laws

2. Determine who was in violation or compliance of the AICPA's Code of Professional Conduct in this case study and analyze the key reasons why they were or were not in compliance. Provide support for the rationale.

3. Analyze the actions taken by Cardillo's outside auditors and evaluate the level of efficiency of the audit risk management in this case study. Provide support for the rationale.

4. Determine whether or not the five (5) components of internal control were being followed. Support the response with at least two (2) examples.

5. Create an argument for or against whether auditors have a responsibility to assess the judgment of the decisions made by Cardillo's management. Support the argument.

6. Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and similar type Websites do not qualify as academic resources.

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Running head: CARDILLO TRAVEL SYSTEMS CASE

Cardillo Travel Systems Case
Names:
Institution:

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CARDILLO TRAVEL SYSTEMS CASE

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Cardillo Travel Systems case
Q 1. Rationale of the SEC in charging Cardillo executives
The Securities and Exchange Commission (SEC) had sufficient reasons to charge a
number of Cardillo’s executives with various violations. Regarding making false
representations to outside auditors, there are clear guidelines on ways that the management
should collaborate with external auditors in maintaining the credibility of the audit reports. In
this regard, SEC requires the management to maintain the credibility of an internal audit while
at the same time providing reasonable assurance to external auditors as they conduct the audit
process in order to ensure that the report adheres to the set GAAP standards (Securities and
Exchange Commission, n.d). Rather than providing assurance, Cardillo’s management lied to
external auditors regarding the source of funds and its relationship with United Airlines and
thus threatened the credibility of the result.
Cardillo also failed to maintain accurate financial records. The president, chairman,
and the vice president of president of finance all colluded in misrepresenting the $203,000
received from United Airlines as revenue while it was refundable to United Airlines should
Cardillo had failed to meet some conditions. Under section 13(b), SEC requires that an
organization always make and keep records that reflect all transactions and that have
sufficient details about these transactions (Securities and Exchange Commission, n.d). The
company thus violated these requirements.
Cardillo’s management failed to file financial reports with the SEC as was the case
with failure to disclose the $685,000 penalty imposed by the court. SEC has a number of
conditions under its section 13 regarding the filing and disclosure of information on time, and
whose failure warrants penalties or even revocation of operating lice...


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