Case 4.4 Waste Management

Topics: Audit, Auditing, External auditor Pages: 4 (1053 words) Published: November 29, 2013
FRAUD CONDITIONS
Three conditions are often present when fraud exists; incentives, opportunity, and attitude. All of these conditions can be seen in the fraud at Waste Management.
Waste Management was under pressure from other companies within the industry that could offer the same services at lower prices to customers. Dean L. Buntrock, founder, chairman, and CEO of Waste Management was the driving force behind the fraud. Buntrock set the earnings targets, fostered a culture of fraudulent accounting, and personally directed certain of the accounting changes to make the targeted earnings. Buntrock presented himself as a pillar of the community, all the while knowingly committing fraud to fund his endeavors. He perceived himself as such an entrepreneur and community servant that ten days before his wrongdoings became public he enriched himself with a tax benefit by donating inflated company stock to his college alma mater to fund a building in his name.

Buntrock was not the only one involved in the fraud at Waste Management. Phillip B. Rooney, president and COO, James Koenig, CFO, and four other officers were named in the complaint by the SEC. In addition, the auditing firm Arthur Anderson was alleged to have been aiding Waste Management in their schemes. Every CFO and CAO in Waste Management’s history as a public company had previously worked as an auditor at Anderson. This interesting fact gives some insight into how the company was able to commit their fraudulent activities for so long. REASONS FOR ESTIMATIONS

After reviewing Waste Management’s balance sheet it can be seen that many of the account balances were based on significant management estimation techniques. The following is a list of the accounts and reasons why the estimates were required for each account: •Accounts Receivable – Accounts receivable were affected because management estimated the allowance for doubtful accounts. •Property & Equipment – Since the company did not use the...

References: Arens, A., Elder, R., & Beasley, M. (2014). Auditing & assurance services. (15 ed.).
Boston: Pearson.
PCAOB. (2001). Au section 342. Retrieved from http://pcaobus.org/standards/auditing/pages/au342.aspx
SEC. (2002, July 20). section 206 - conflicts of interest. Retrieved from http://www.sec.gov/about/laws/soa2002.pdf
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