The analyzed case study refers to the Hollate Manufacturing company, which belonged to the home construction industry since 1950s. The company operated in the United States and Canada with 14 divisions spread throughout the countries. Hollate’s performance was significantly better than its peers, resulting in $1 billion sales. The company maintained its growth over the years due to growth-through-acquisition strategy. However, the home construction industry suffered downturn in recent years. Hollate manufacturing faced a problem with audit as far as with personnel. Four suggestions are given along with answer to the question how to avoid alike situations. Problem statement
After initial public offering Jack Brennahan took the position of the chief executive officer in the company. It resulted in hiring an experienced and well-educated William Blackburt, who took Brennahan’s former position as chief financial officer. Subsequently the board was reorganized and the board committees were created. The rapid growth of the company was not followed by hiring more auditors and had only four at that time, moreover, internal audit did not test financial reporting. Jonas Durand, the chief audit executive met often with the CFO instead of with audit committee. The CEO seemed too optimistic about the downturn ending soon. Additionally, new external auditor took Hollate as its client. Data analysis: Members of the audit committee, apart from chair of the audit committee, were not well-versed in accounting rules, even the basic ones. The suggestion of providing them with instructions in basic accounting matters was rejected. This was a serious case, as audit committees should be aware how Hollate’s books were constructed, so they could justify its correctness. Furthermore, the CAE failed to hire more internal audit personnel and had difficulties in fulfilling his tasks in time, which was a serious issue because Duran could not cope with amount of tasks he was...
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