FreescaleSemiconductor, Inc. is among the largest corporations based inAustin, Texas that deals with production of semiconductors. Also, itwas controlled by Motorola, Inc., and was its subsidiary for thelongest time. However, in July 2004, Motorola planned to break awayfrom the company. It was during one of the largest public offeringsthat Motorola forged on with the process. Additionally, Ernst &Young was required by Black Stone to offer consultancy servicesduring the acquisition of Freescale semiconductors from Motorola,Inc. Before completion of the process, Ernst & Young was alsoexpected to ensure that the human resource functions were in check.
CanAdditional Laws and Harsher Penalties Eliminate Financial Fraud?
Yes,additional laws and harsher penalties are considered necessary withregard to elimination of financial fraud. One of the consultants fromE&Y, James Gansman was cautioned on matters to do withconfidentiality pertaining the acquisition of FreescaleSemiconductor, Inc. However, in 2006, James Gansman leakedconfidential information to his friend Donna Murdoch, who was anemployee in the investment banking industry (Knapp, 2011). With theinformation, Donna Murdoch accumulated a large sum of money fromFreescale’s stock market. Additional laws in companies may play agreat role in the elimination of financial fraud through closemonitoring of employees (Knapp, 2014). On the other hand, harsherpenalties may also be a necessity in relation to elimination offinancial fraud. In the case of James Gansman and Donna Murdoch thecourt verdict proved lenient to the parties involved. Employment ofharsher penalties such as punishing all the individuals involved inthe case may be a stepping stone to elimination of financial fraud.According to the judge, it was only Gansman who was guilty of fraudthus sentencing him to prison. In addition, he was sentenced toprison for a short period of time rather than being sentenced to aperiod proportional to the crimes he committed.
Whatare Three New Strategies that the Government Can Implement toEliminate Insider Trading?
Insidertrading is an illegal part of business hence it is important to findways of completing eliminating it from the world of business. Thereare three new strategies that the government can implement in a bidto hinder insider trading. With regard to the James Gansman, andDonna Murdoch case, there were measures which the Securities andExchange Commission employed in order to eliminate insider trading.Firstly, the government may use special software programs in order tomonitor, and detect any suspicious trading activities on the stockmarket. As observed in the Gansman and Murdoch case the governmentmay place the suspected individuals on the watch list in a bid tomonitor their transactions in the stock market. The last strategyinvolves dispensing the collected information to court in order forthe judges to give a verdict. Through the strategies, the governmentmay eliminate or mitigate insider trading.
DetermineKey Internal Controls Needed Over the Communication of ConfidentialCommunication to Outside Parties. How Do These Controls Act as aDeterrent to Fraudulent Activities?
Inthe Freescale semiconductor, Inc. case study, leaked merger andacquisition information triggered the existence of fraudulentactivities. However, there are key controls necessary in relation toconfidential communication to outside parties (Knapp, 2014). Thesecontrols are necessary in monitoring the internal activities ofvarious institutions. In determination of key controls, individualsshould have an understanding on the internal control system.According to Knapp (2014), it is important to understand how theinternal control system works, and to have an insight on the ways inwhich the system could fail as this is important with regard toidentifying the key internal controls. Through key controls, there ismonitoring of confidential information hence there are less chancesof dissemination of the information to outside parties. Consequently,there are no chances of fraudulent activities and it is in thatmanner that key controls deter, and hinder fraud (Knapp, 2014).
Whatis An Alternative Plan to Act on the Leaked Information? RecommendOne Strategy to Communicate the Alternative Plan. Whom should youcommunicate with?
IfI were Donna Murdoch, I would not act upon the confidentialinformation on a personal level. Instead, I would use the informationas evidence of James Gansman’s fraudulent acts. For thecommunication of the alternative plan, I would contact the E&Yemployees, and informe them of the fraudulent activities taking placeamong their colleagues. Consequently, the employees would dispensethe information to Blackstone who would then hold James Gansmanresponsible of fraud. Donna Murdoch was interested in the amount ofmoney she would make from Freescale Semiconductor, Inc and for thatreason, taking this approach would result in heavy compensation. Thealternative plan does not involve many people as compared to theapproach taken by Donna Murdoch with regard to the leaked information(Knapp, 2014).
Compareand Contrast the Auditor’s Professional Responsibilities betweenConsulting Engagements and Audit Engagements
Inthe Freescale semiconductor, Inc. case study, E&Y was responsiblefor providing consulting services to the Black Stone Group. It isnecessary to note that auditors have professional responsibilitiesleaning toward consulting, and auditing. With regard to the Freescalesemiconductor, Inc. case study, the auditors exhibited bothconsulting, and audit responsibilities. In relation to consultancy,Blackstone required E&Y to focus on Freescale’s human resourcefunctions. Additionally The Blackstone Group expected E&Yemployees to improve the human resource functions, and contribute tothe effectiveness of the functions(Klein, 2015).With regard to audit responsibilities, auditors are required tomonitor internal controls, and ensure confidentiality of informationwithin the institution. In the Freescale semiconductor, Inc. casestudy The Blackstone Group expected E&Y employees to adhere tothe confidentiality policy. James Gansman who worked in E&Y’sTransaction Advisory Services was cautioned concerningconfidentiality of Freescale’s information(Klein, 2015).Consequently, it is salient that ensuring confidentiality ofinformation is a major responsibility of auditors.
Itis necessary to note that the consultancy responsibilities ofauditors lean towards matters to do with human resources. In anyorganization, it is the employees who deal with consultancy hencethey ought to be in check in preparation for the consultingengagements(Klein, 2015).As prior mentioned, auditors play the role of improving the functionsof human resources. It is important to note that the improvement ofthe functions results in better consultancy hence exquisiteconsulting engagements(Klein, 2015).On the other hand monitoring of internal controls is a prominentfunction with regard to auditing responsibilities to auditors.Auditing refers to the examination, inspection, or survey of aparticular individual or organization. As aforementioned internalcontrols function in the monitoring of internal activities indifferent organizations. With regard to the Freescale semiconductor,Inc. case study The Blackstone Group clearly outlined the auditingfunction of E&Y employees.
However,it is impossible to compare the auditor’s professionalresponsibilities regarding consulting and auditing engagements. Theimpossibility lies in the fact that there’s more of a contrast thancomparison between the two engagements. In a nutshell, an auditengagement is that which involves the process a company undergoes inrelation to auditing. On the other hand, a consulting agreementrefers to the mutual decision made by the client, and auditorregarding the consultancy in question (Knapp, 2014).
WillMore Legislation and/or Regulation Increase or Decrease CorporateFraud?
Morelegislation and/or regulation play a great role in decreasing thechances of corporate fraud. Legislation entails implementing certainlaws to be used in governance of the corporation in question. On theother hand, regulation is classified as a purpose of legislation. Itis through legislative measures that regulatory measures arise in abid to fight, and decrease chances of fraudulent activities (Coenen,2008).More regulatory measures such as improving security with regard toinformation in the corporations have a great effect in the decreaseof corporate fraud. Also, it is salient that those corporations thatcomply with the set regulations often avoid penalties. As a result,there is a reduction in the existence of corporate fraud.
Also,pertaining to legislation corporations and companies are oftenrequired to exhibit a code of conduct in order to reduce the chancesof corporate fraud. In the event where employees possess a code ofconduct, there are less unethical happenings, and this decreasescorporate fraud. When the employees of a certain institution actunethically, there are high chances of fraudulent activities(Coenen, 2008).
Coenen,T. (2008). Essentialsof corporate fraud.Hoboken, N.J: John Wiley & Sons.
Knapp,M. C. (2011). Contemporaryauditing: Real issues and cases.Australia: South-Western/Cengage Learning.
Knapp,M. C. (2014). Contemporaryauditing: Real issues and cases.Cambridge: Cambridge University.
Klein,G. L. (2015). Ethicsin accounting: A decision-making approach.New York: Barons Press.