Open AccessCalifornia Micro Devices Corp.: A Class Discussion Of Auditors Ethical, Legal, And Professional Responsibilities
Author(s) -
Freddie Choo,
Kim B. Tan,
Robin M. Wagner
Publication year - 2005
Publication title -
journal of business case studies
Language(s) - English
Resource type - Journals
eISSN - 2157-8826
pISSN - 1555-3353
DOI - 10.19030/jbcs.v1i4.4933
Subject(s) - audit , class action , shareholder , accounting , business , class (philosophy) , action (physics) , public relations , finance , corporate governance , political science , computer science , state (computer science) , physics , algorithm , quantum mechanics , artificial intelligence
This short case is best for an open discussion in an upper-division auditing class. The class discussion questions intensify students learning experience on (1) auditors ethical responsibility to resolve tough ethical issues, (2) auditors legal responsibility to detect fraudulent financial reporting, and (3) auditors professional responsibility to conform to auditing standards. Additional class discussion questions, optional hands-on internet experience, and class discussion guide are provided. The case illustrates how a high-technology company succumbed to the pressure of unrealistic financial goals in an industry that is characterized by rapid technology change, intense competitive pressure, and volatile demand patterns for computer chips. High-level management at the company orchestrated fraudulent financial reporting schemes by creating fictitious sales and shipping bogus inventories. The fraud was uncovered only after the companys Board of Directors appointed a third auditor to investigate the sophisticated fraudulent schemes. However, the action came a little too late as the shareholders began to file class-action securities lawsuits against the company and its former auditor.