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7/24/2019 Hmi - Ridwan- Lh
1/19
Presented By:
Nama Anggota Kelompok :
1.Mochamad Ridwan Pratama - NPM 13064!6"6
".#erri $l%ng &atri'a ( NPM 13064!361
3.#erdinand &irait ( NPM 13064!3))
4.*elo +a,i,i ( NPM 1"0633)"0)
Health Management, Inc.
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Health Management, Inc
Cliford Hotte Had Problem ( Had come upshort o its ernings target)
inancial analyst pro!ected "#$%&
earning'share ctual P* "#$+&o achie-ed target :Bregman (C.) o lo/er
C.*, Increase 0ross pro1t and net income
22
in3ated "4$5 M year end in-entory ande/ smaller ad!ustment Bregman super-ised B6. *eidman 4757
and 477# audit HMI
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Health Management, Inc 8
Cont9driggernya : 477+ Pri-ate *ecurities itigation;eorm ct (P*;) , ne/ ederal la/$ 6imanadengan P*; ini, sema
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Health Management, Inc 8
Cont9d 4774 Big *i> campaign to persuadecongress to reorm the ederal la/$
P*; contains se-eral clause to
independent audit unction, re=uiresaudit 1rm to design audit to pro-idereasonable assurance to detecting illegal
act and reporting to *C any illegal actby client$
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?.h, by the /ay@A
11/17/15
he B6. *eidman audit team 1nally arri-ed at HMI9s head=uarters duringthe latter part o une$
.n that 1rst day at the client9s oce, sai recei-ed a rude shoc< rom herold riend$
6uring a meeting /ith sai, Bergman inormed her o the "4$5 million o in2transit in-entory at year2end$
sai, no doubt, /as alarmed by that 1gure since it represented nearlyt/enty percent o HMI9s year2end in-entory o "7$5 million andappro>imately one2hal o the year2end in-entory o HMI9s De/ Eoramined the e>pense report 1led by truc< dri-er and ound consistent /ith hischronolgy o the rele-ant e-ents and the chronology o those e-ents pro-ided byother HMI personnel$
+) 6iscussed the in-entory transers /ith HMl9s controller /ho pro-ided a crediblee>planation or /hy the transers /ere necessary$
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ists he Principal udit
Procedures (Cont9d)
11/17/15
) 6iscussed the in-entory transers /ith HMI9s C. (Bergman) /ho indicated thathe had not been able to pre-ent the transers because he had not learned o themuntil ater the act$
%) Fsed -arious mathematical tests, including a gross pro1t percentage test tochallenge the reasonableness o the company9s total year2end in-entory, these testssuggested that the year2end in-entory /as reasonable$
5) .btained standard management representations letter and separate representationletter rom company ocials ocusing e>clusi-ely on the in2transit in-entoryL each othese letters con1rmed the e>istence o the in2transit in-entory$
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.ther Issue in udit
ngagement
11/17/15
4) Dear the end o the audit, a dispute arose bet/een HMI management andthe auditors regarding the ade=uacy o the allo/ance or doubtulaccounts or the company9s more than "K# million o accounts recei-able$
N he auditors proposed an ad!usting entry to increase the year2endbalance o the allo/ance account by "4$ million$
Management insisted that an increase o only one2hal o that amount/as necessary$
ter considerable discussion /ith HMI9s ocers, ed Bornsteindecided to accept the client9s proposed ad!ustment o "##,### or the
allo/ance account$
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.ther Issue in udit
ngagement (Cont9d)
11/17/15
) nother problem the HMI audit team aced during the 477+ engagement/as an earnings release issued by the company appro>imately one /eeerts subtle but signi1cant pressure on the auditors to
?passA on proposed ad!ustments that /ould materially reduce theprematurely released earnings 1gure$
I the auditors insist that a lo/er earnings 1gure be included in theaudited 1nancial statements, the unpleasant ?earnings surpriseA maycause a sharp drop in the clients stoc< price$
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;esult @
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B6. *eidman completed the 477+ HMI audit in late uly$
*imilar to the audit opinions issued by the 1rm in pre-ious years on HMI9s1nancial statements, the 477+ audit opinion /as un=uali1ed$
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ter ;eleased he udit oinancial ;eport
11/17/15
In 6ecember 477+, 6re/ Bergman /as gi-en a ne/ title at HMI, Corporate6e-elopment .cer$
Paul ure/icO, an indi-idual /ith considerable accounting e>perience in thehealthcare industry /as hired to replace Bergman as HMI9s C.$
*hortly ater he !oined HMI, ure/icO /as ha-ing a casual con-ersation/ith the company9s controller, one o Bergman and Hotte9s coconspirators$
N 6uring that con-ersation, the controller matter2o2actly reerred tothe in-entory raud, belie-ing
ure/icO /as a/are o it$
ure/icO inormed Cliford Hotte o the inormation he had accidentallyobtained rom the controller$
N 6uring that con-ersation, the controller matter2o2actly reerred to
the in-entory raud, belie-ingure/icO /as a/are o it$
N ure/icO then too< matters into his o/n hands and inormed thecompany9s legal counsel$
In ebruary 477, HMI issued a press release indicating that irregularitieshad been disco-ered in the company9s accounting records$
N hat press release sent HMI9s stoc< price spiraling do/n/ard andprompted B6. *eidman to /ithdra/ its audit opinion on the companys477+ 1nancial statements$
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ter ;eleased he udit oinancial ;eport (Cont9d)
11/17/15
he attorneys or HMI9s stocimately "K% million and that B6. *eidman /asresponsible or %+ percent o those damages$
In .ctober 477%, another healthcare 1rm ac=uired HMI or a nominalamount$
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;ed lags Crooimately "##,### in total$
N hat amount /as our times larger than the appro>imately "4,###B.. *eidman recei-ed or perorming the 477+ HMI audit$
he principal ob!ecti-e o the plaintif attorneys /as to con-ince the !urythat the auditors, at a minimum, had rec
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Question 4
4$ B6. *eidman9s attorneys pointed outcorrectly that proessional standards donot prohibit auditors and client
personnel rom being ?riendsA$ t /hatpoint do such relationships result in-iolations o the auditor indepencenerules and guidelinesR Pro-ide
hypothetical e>amples to strengthenyour ans/er
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ns/er
* 4##$& : *etiap Pra
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Question
ccording to court testimony on uly #, 47++,6re/ Bregman recommended to HMI9sboard o directors that Mei2ya2sai be hired
as the company9s chie o accounting$ .ne/ee< later, B6. *eidman issued its auditreport on HMI9s 477+ 1nancial statements$Fnder presently e>isting proesional
standards /ould this situation ha-epresented an indepence ?problemA or B6.seidmanR 6eend your ans/er
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ns/er
* 4##$& : *etiap Pra