Molex Case Analysis Essay - 916 Words

Case Analysis 1. What factors do you think influenced Molex management’s decision not to raise the issue with the auditors? The factors that I think influenced Molex management’s decision not to raise the issue with the auditors could have been many but I think the most significant was probably that they thought it was immaterial. The accounting error accounted for $8 million of inventory that had affected results for several years. Management did not find this error until mid-July 2004. The review states that Molex had struggled financially in 2002 and 2003. In first quarter of 2004 (ending September 30, 2004) revenue had increased by 29 percent for the first quarter of 2003. Gross profit margin was 35.7 percent for the first†¦show more content†¦However, when Deloitte Touche discovered that King and Bullock had signed the letter and did not disclose the issue, that is when the auditors came out and said that the problem was bigger then previously assumed that they c ould not work with King and Bullock. It appears that even though the $8 million was not material, the trust needed between the auditors and the CEO and CFO was material and that line of trust had been breached. Another factor why the auditors were so concerned about the reporting problems was because of what happened to their competitor Arthur Anderson a few years earlier. The SEC rules had been tightened and the Sarbannes Oxley Act of 2003 had been enacted. All of the audit companies were under much tighter control and they did not want to be in a position where they had to justify their actions to the government for fear of being shut down. 3. If you were a member of the board of directors would you agree with the auditor’s concerns, why or why not? If I were a member of the board of directors I would probably agree with the auditors concerns. I would be concerned that the King and Bullock signed the letter and was not completely honest with the information that they knew about. I would be concerned and it would defiantly be a black mark in their files but I don’t think that I agree with the auditor’s decisionShow MoreRelatedCase Analysis : Molex Inc. Designs, Manufactures, And Distributes Electronic Connectors Essay1585 Words   |  7 PagesIntroduction Molex Inc. designs, manufactures, and distributes electronic connectors that are used by a variety of industries. Despite being a successful company, Molex experienced some downfall in 2002 and 2003. Demand for their products sunk and their financial performance declined. This occurred around the same time as the accounting scandal with Enron happened. 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