Case 2 Jamaica Water Properties I

Topics: Internal control, Auditing, Audit, Financial audit, Big Four auditors / Pages: 14 (5192 words) / Published: Dec 15th, 2014
Case 2
Jamaica Water Properties
Table of Contents

Issues………………………………………………………………………………..... 1
Facts………………………………………………………………………………….. 2
Analysis…………………………………………………………………………….... 11
Conclusion/Recommendations………………………………………………………. 17
Reference/Bibliography…………………………………………………………….... 19

Issue
1. After discovering the suspicious items in JWP’s accounting records, should he have taken a different course of action than he did?
2. What measures can and should be taken to make it easier for corporate employees to ‘‘blow the whistle’’ on a fraudulent scheme they uncovered within the firm?
3. Should business, accounting firms, and other organizations explicitly reward ethical behavior by their employees and executives?
4. What measures can accounting firms take to reduce the risk that personal relationships between client personnel and members of an audit engagement team will not adversely affect the quality of an audit?
5. Was the 1988 ‘‘retention agreement’’ that Ernst & Young made with JWP appropriate?
6. Why did Ernst & Young agree to pay a large settlement to JWP’s stockholders but chose to contest the lawsuit filed against it by the insurance companies?

Facts This accounting fraud involves a company called Jamaica Water Properties Inc. with based in the New York-based. The person who found the fraud was David Sokol. In his early career, he faced some problems that typically interferes the careers of many business executives, such as favoritism and corruption. However, in 1992 David obtained the position of president and COO of Jamaica Water Properties. JWP had an impressive history of sustained profitability and revenue growth that was being threatened by its sprawling operations and heavy administrative burden. In early 1992, the company had 117 offices and 23 subsidiaries scattered across the country several overseas operating units, and a huge new division that was competing in a lucrative and rapidly developing market JWPs CEO Andrew Dwyer knew that



References: U.S. Securities and Exchange Commission. Audit Committees and Auditor Independence. Retrieve from: http://www.sec.gov/info/accountants/audit042707.htm. October 27, 2014. U.S. Securities and Exchange Commission. Sarbanes-Oxley Act of 2002. Retrieve from: https://www.sec.gov/about/laws/soa2002.pdf. October 27, 2014.

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