Bubba Tech Inc Essay Example for Free

Bubba Tech Inc Essay After seven years working, Carson became a certified public accountant and Boone successfully complete a masters egree program in Information System at Southern Methodist University. In 2001, Carson and Boone formed a manufacturing company, Bubba Tech Inc. (BTI) in Austin which is privately owned by them and venture capital firm. Boone becomes chief executive officer (CEO) and Carson become chief financial officer (CFO) in BTI. There was no board of director because the firm has completely confidence in the ability of Carson and Boone. Venture capitalists provide a provision into their agreement where Boone and Carson would received 10% return on their investment for five ears and after company went public they would be repaid the amount of their investment. BTI had hired Randy Burnham ; Co. to audit its financial statement on 31 December 2012 due to their plan to go for public within five years. Burnham completed its audit for that five years in BTI and give unqualified opinion on the audited financial statement. In 2007, BTI decided to go as public. In meeting with Burnhams auditor, Boone ask Clint Strait, the partner who in charge of BTI audit to prepare a list of top operational issues to consider as the company went from being privately held to publicly held corporation. Then, Strait set up a team to proceed. The teams consist of Randy Burnham and Clint Strait itself, Shania Hill (the manager in charge of audit), Faith Twain (who had in charge consulting services engagement for BTI), Garth Chesney (tax department) and Kenny Brook (who responsible for information technology work related to audit of BTI). QUESTION 1 Based on the limited facts of this case, prepare a list of the operational issues to present the top management at BTI. Include in your list any corporate governance issues of importance in relation to the management of BTI after it becomes a public ompany and any issues related to the relationship between BTI and Randy Burnham co. ANSWER: Referring to the case of Bubba Tech, Inc. (BTI), there are several operational issues to be presented to the top management at BTI which concerning the corporate governance and issue related to the relationship between BTI and Randy Burnham Co. The operational issues that can be highlighted are the issue of working with potentially biased audit firm, lack of internal control and lack of corporate governance. The chief financial officer (CFO) of BTI, Willie Carson was once an employee of the Randy Burnham Co. , an accounting tlrm that is currently acting as the auditor tor BTI. The relationship between Carson and the auditors from Randy Burnham Co. may cause a conflict of interest. A conflict of interest is a situation in which private interests or personal considerations could affect or to perceived to affect both Carson and the auditors from Randy Burnham Co. Judgements to act in the best interests of BTI. The relationship of Carson and the auditors may influence the Judgement and the decision relevancy that creates many of the conflict of interest problems in the business. For instance, Carson may ask the auditors favour to conceal the material misstatement found in the financial statement from the venture capital firms knowledge. Objectivity and integrity are essential qualities for employees of any organization. The affected result is not only the unqualified opinions rendered for the audited financial statements for previous years are arguable but also the transparency of every future Judgement and decision is doubtful as BTI is working with an audit firm that potentially biased towards BTI. The second issue that can be highlighted is the lacking of internal control in BTI rganization. One of the best defences against business failure, as well as an important driver of business performance, is having an effective internal control system, which manages risk and enables the creation and preservation of value. A system of internal control refers to the process by which organizations maintain environments that encourage incorruptibility and deter fraudulent activities by management and employees. Based on the fact stated in this case, BTI was privately owned by Carson, Boone, and a venture capital firm where Carson has been appointed as CFO, Boone as CEO and there was no board of directors. Obviously all the decision related to operations, management, and financial are decided by either Carson or Boone, or both of them. There is no other party to question, monitor and evaluate their action. This situation is proving the issue of lacking of internal control in BTI organization. If BTI proceeds with the plan to go public, it should establish a well-tailored, govern, and implemented set of internal control in its organization. Corporate governance is the internal structure of a corporation from its lowest level workers all the way up to its executives. Corporate governance has far-reaching ffects not only for the business itself but for the financial market as a whole. In the case of BTI, the CFO management integrity and the external auditor integrity are questionable as the relationship built between them may cause conflict of interests and fraud. Management integrity, or the moral character of persons of authority, sets the overall tone for the organization. However, managements enforcement of policies is the major indicator of an organizations commitment to a successful internal control system. Unfortunately, was not applied by BTI organization. Another issue that can be raised is the segregation of duties. The absent of board of directors fgure in BTI organization causing so many critical issue as there is no stewardship centre that determining the companys approach to corporate governance, including developing a set of corporate governance principles and guidelines that are specifically applicable to the company . Carson and Boone have the freewill to decide on anything related to the company. Segregation of duties is critical to effective internal control because it reduces the risk of mistakes and inappropriate actions.