Overview
Discussion - What if You Can't Trust the Numbers?
In 2000, the high flying company Enron completely collapsed taking venerable accounting and audit firm Arthur Anderson along with it. There were some warning signs, but right up to the end, an examination of the company’s financial statements showed a healthy company with no reason to be concerned. Of course, the numbers were fiction, as were many of the operations of the company itself. This meltdown ultimately led to passage of the Sarbanes- Oxley Act of 2002, which requires the CEO, CFO, CIO and all of their supporting managers to certify that the financial information being reported is correct and accurate. Penalties for failure to comply are severe.
Plato wrote of the analogy of the Cave – prisoner’s only experience of reality is what they see reflected in the shadows on the blank wall in front of them. Think about the financial statements discussed this week.
- How are they real and how are they simply reflected shadows?
- And if they are simply reflected shadows, what do we need to do as managers to ensure that they are an accurate reflection of the business, and not just a shadow?
- Assignment - Under Armour Settles with the SEC
- This assignment allows you to learn about reporting requirements for public corporations. The case also engages you in the issues around failure to disclose material information regarding corporate performance. Read the case “Under Armour Settles with the SEC” in your coursepack. Based on what you learn in the case, the readings and lessons for this week, and any additional outside research you perform, consider the following: The House Oversight Committee has expressed concerns about the settlement. You are a legislative aide to the committee chair, Congressman Bufford Pusser of Tennessee. He has asked for your assessment of the situation in a 3-page comprehensive memoLinks to an external site..
- What were Under Armour’s essential problems? Of the problems you cite, which are the most critical? Why?
- Did Under Armour intentionally mislead investors? If so, how was this possible?
- What do these events tell you about Under Armour’s business?
- Is there any legislation we should consider to prevent any recurrence?