Cases 9 Don Russell Experiences of a ControllerCFO
Don Russell: Experiences of a Controller/CFO
1985: Coporate controller at C&S updated the charts of accoutns did major cost reductions was promoted to vice president intitiated a study on the strategic planning tried to convicen management to change to a chash focused planning system instead of operating income
1989
CFO at EFI
Updated the budget sys. (Satellite business was unprofitable)
Found out that earnings were artificially increased (e.g. by depreciating equipment longer than realistic and deferring expenses)
In 1990, Don subjected accounting adjustment of decreasing of 2 mio doller, CEO denied
In 1991 profit forecast has to be adjusted due to false profit projection
1. Was Don Russell a good controller for Cook and Spector, Inc.? Why or why not?
Strengths
Weaknesses
tried to raise concern about the problem with the CEO
Modernized the accounting system cost reductions were realized
Allowed the possibility for accounting fraud by modernizing the accounting system
Did’nt inform top-management at the beginning
Was not able to convince top-management
Analytical skills: Not sure, not fulfilled
Business judgment: not sure
Recommendations: makes recommendations, furfilled
Interpersonal skills:
Conclusion: He gave recommendation on changing the accounting system, but could not change the top managements decision on not changing the system.
-> subjected opion: More bad than good…
2. Does Don have the power to force ETI top management to make a correcting accounting entry? If not, what should he do? If so, should he force the entry to be made, and how large should it be?
Answer both of the questions
Making the correcting accounting entry
Alternatives make an accounting entry to write off inappropriate assets
-> Make the firm to look bad, but being a good controller, probable loose his job
Ignore it, it will prolong the problem, not being a good controller,
Could talk to the external auditors,
1985: Coporate controller at C&S updated the charts of accoutns did major cost reductions was promoted to vice president intitiated a study on the strategic planning tried to convicen management to change to a chash focused planning system instead of operating income
1989
CFO at EFI
Updated the budget sys. (Satellite business was unprofitable)
Found out that earnings were artificially increased (e.g. by depreciating equipment longer than realistic and deferring expenses)
In 1990, Don subjected accounting adjustment of decreasing of 2 mio doller, CEO denied
In 1991 profit forecast has to be adjusted due to false profit projection
1. Was Don Russell a good controller for Cook and Spector, Inc.? Why or why not?
Strengths
Weaknesses
tried to raise concern about the problem with the CEO
Modernized the accounting system cost reductions were realized
Allowed the possibility for accounting fraud by modernizing the accounting system
Did’nt inform top-management at the beginning
Was not able to convince top-management
Analytical skills: Not sure, not fulfilled
Business judgment: not sure
Recommendations: makes recommendations, furfilled
Interpersonal skills:
Conclusion: He gave recommendation on changing the accounting system, but could not change the top managements decision on not changing the system.
-> subjected opion: More bad than good…
2. Does Don have the power to force ETI top management to make a correcting accounting entry? If not, what should he do? If so, should he force the entry to be made, and how large should it be?
Answer both of the questions
Making the correcting accounting entry
Alternatives make an accounting entry to write off inappropriate assets
-> Make the firm to look bad, but being a good controller, probable loose his job
Ignore it, it will prolong the problem, not being a good controller,
Could talk to the external auditors,