Incentives: from the case, the SEC staff claimed that the top Waste Management officers’ fraudulent conduct was driven by greed and a desire to retain their corporate positions and status in the business and social communities. Their bonuses, retirement benefits and stock options closely correlate with the performance of the company. If the company meets predetermined earnings targets, those top managements will earn a lot from profit sharing. Furthermore, aside from money, those people can maintain their high social status by constantly using those ill-gotten gains to contribute to …show more content…
b. Use other alternatives to develop the estimation and compare the result to the original estimation.
c. Review subsequent events or transactions to confirm the credibility of the previous estimation.
6. For those officers who previously served Arthur Anderson, they may implicitly or explicitly force the auditor to accept their adjustment of Waste Management’s financial report. Since they worked for Anderson, they know every detail of auditing procedures performed by the auditor and thus may use their relationship to influence the judgments of auditors. Furthermore, if there is an conflict of interest between those officers and the company, they may chose the ways which are beneficial to themselves. To avoid this kind of fraud, the Sarbanes-Oxley Act of 2002 Section 206 clearly identified what a company should do when potential conflict of interest may occur. Based on the article, it shall be unlawful for registered public accounting firm to perform for an issuer any audit service required by this title, if a chief executive officer, controller, chief financial officer, chief accounting officer, or any person serving in an equivalent position for the