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The Boeing Company Case Study

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Answered Same Day Mar 26, 2020

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Abr Writing answered on Mar 27 2020
139 Votes
The Boeing Company
1. The five components of an effective and efficient internal control system are bulleted as follows –
a) Control environment
· Ethical and Integrity
· Audit Committee and Board of directors
· Operating style and Management Philosophy
· Structure of organisation
· Responsibility and assignment of Authority
· Procedures and Human resource policies
) Control activities
· Procedures and policies
· Business backup / continuity planning
· Security related to networking and application
· Outsourcing
c) Risk assessment
· Objectives at process level
· Wide objectives at company level
· Analysis and risk identification
· Change management
d) Monitoring and,
· Evaluations at separate level
· Reporting of deficiencies
· Real time monitoring
e) Communication & information
· Communication effectiveness
These above mentioned component workout to support in segment of attaining missions of entity, its related business objectives and general strategies.
The component most relevant to whistle blowing, as in the case of Neumann & Tides, is the information & communication component (COSO, 2014). Neumann & Tides had tried to express their concerns through the proper channels within Boeing. However, those concerns addressed in the particular case structure were not heeded. Neumann & Tides then released pertinent information to a reporter, who then published that information in an article. As a result, both Neumann & Tides lost their positions with Boeing.
2. According to the PCAOB, a significant deficiency is “a control deficiency that adversely affects the company’s ability to initiate, authorize, record, process, or report external financial data” in accordance with GAAP so there is less likely a chance of misstatement (PCAOB, 2014). An example of a significant deficiency involves monthly general ledger account reconciliations. Consider a company has monthly general ledger account reconciliations to do along with intercompany reconciliations to confirm balances. That company does not have a policy in place to make sure these reconciliations are completed. The employees required to perform these reconciliations are not conducting them in a timely manner; therefore, variations occur without being caught. This is a significant deficiency in the manner that, being intercompany transactions, they are less consequential because the compensating controls would catch material misstatements.
According to the PCAOB, a material weakness is “deficiency at a significant level that results out in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected” (PCAOB, 2015). Consider the above example. Unreconciled differences which do exists in intercompany accounts are generally considered to e material. This is considered as material weakness.
This would probably not qualify as a material weakness in internal control if inventory and inventory transactions are not typically “material.” On the other hand, most...
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