Hmi - Ridwan- Lh

7/24/2019 Hmi - Ridwan- Lh

1/19

Presented By:

Nama Anggota Kelompok :

1.Mochamad Ridwan Pratama - NPM 13064!6"6

".#erri $l%ng &atri'a ( NPM 13064!361

3.#erdinand &irait ( NPM 13064!3))

4.*elo +a,i,i ( NPM 1"0633)"0)

Health Management, Inc.


2/19

Health Management, Inc

Cliford Hotte Had Problem ( Had come upshort o its ernings target)

inancial analyst pro!ected "#$%&

earning'share ctual P* "#$+&o achie-ed target :Bregman (C.) o lo/er

C.*, Increase 0ross pro1t and net income

22

in3ated "4$5 M year end in-entory ande/ smaller ad!ustment Bregman super-ised B6. *eidman 4757

and 477# audit HMI


3/19

Health Management, Inc 8

Cont9driggernya : 477+ Pri-ate *ecurities itigation;eorm ct (P*;) , ne/ ederal la/$ 6imanadengan P*; ini, sema


4/19

Health Management, Inc 8

Cont9d 4774 Big *i> campaign to persuadecongress to reorm the ederal la/$

P*; contains se-eral clause to

independent audit unction, re=uiresaudit 1rm to design audit to pro-idereasonable assurance to detecting illegal

act and reporting to *C any illegal actby client$


5/19

?.h, by the /ay@A

11/17/15

he B6. *eidman audit team 1nally arri-ed at HMI9s head=uarters duringthe latter part o une$

.n that 1rst day at the client9s oce, sai recei-ed a rude shoc< rom herold riend$

6uring a meeting /ith sai, Bergman inormed her o the "4$5 million o in2transit in-entory at year2end$

sai, no doubt, /as alarmed by that 1gure since it represented nearlyt/enty percent o HMI9s year2end in-entory o "7$5 million andappro>imately one2hal o the year2end in-entory o HMI9s De/ Eoramined the e>pense report 1led by truc< dri-er and ound consistent /ith hischronolgy o the rele-ant e-ents and the chronology o those e-ents pro-ided byother HMI personnel$

+) 6iscussed the in-entory transers /ith HMl9s controller /ho pro-ided a crediblee>planation or /hy the transers /ere necessary$


7/19

ists he Principal udit

Procedures (Cont9d)

11/17/15

) 6iscussed the in-entory transers /ith HMI9s C. (Bergman) /ho indicated thathe had not been able to pre-ent the transers because he had not learned o themuntil ater the act$

%) Fsed -arious mathematical tests, including a gross pro1t percentage test tochallenge the reasonableness o the company9s total year2end in-entory, these testssuggested that the year2end in-entory /as reasonable$

5) .btained standard management representations letter and separate representationletter rom company ocials ocusing e>clusi-ely on the in2transit in-entoryL each othese letters con1rmed the e>istence o the in2transit in-entory$


8/19

.ther Issue in udit

ngagement

11/17/15

4) Dear the end o the audit, a dispute arose bet/een HMI management andthe auditors regarding the ade=uacy o the allo/ance or doubtulaccounts or the company9s more than "K# million o accounts recei-able$

N he auditors proposed an ad!usting entry to increase the year2endbalance o the allo/ance account by "4$ million$

Management insisted that an increase o only one2hal o that amount/as necessary$

ter considerable discussion /ith HMI9s ocers, ed Bornsteindecided to accept the client9s proposed ad!ustment o "##,### or the

allo/ance account$


9/19

.ther Issue in udit

ngagement (Cont9d)

11/17/15

) nother problem the HMI audit team aced during the 477+ engagement/as an earnings release issued by the company appro>imately one /eeerts subtle but signi1cant pressure on the auditors to

?passA on proposed ad!ustments that /ould materially reduce theprematurely released earnings 1gure$

I the auditors insist that a lo/er earnings 1gure be included in theaudited 1nancial statements, the unpleasant ?earnings surpriseA maycause a sharp drop in the clients stoc< price$


10/19

;esult @

11/17/15

B6. *eidman completed the 477+ HMI audit in late uly$

*imilar to the audit opinions issued by the 1rm in pre-ious years on HMI9s1nancial statements, the 477+ audit opinion /as un=uali1ed$


11/19

ter ;eleased he udit oinancial ;eport

11/17/15

In 6ecember 477+, 6re/ Bergman /as gi-en a ne/ title at HMI, Corporate6e-elopment .cer$

Paul ure/icO, an indi-idual /ith considerable accounting e>perience in thehealthcare industry /as hired to replace Bergman as HMI9s C.$

*hortly ater he !oined HMI, ure/icO /as ha-ing a casual con-ersation/ith the company9s controller, one o Bergman and Hotte9s coconspirators$

N 6uring that con-ersation, the controller matter2o2actly reerred tothe in-entory raud, belie-ing

ure/icO /as a/are o it$

ure/icO inormed Cliford Hotte o the inormation he had accidentallyobtained rom the controller$

N 6uring that con-ersation, the controller matter2o2actly reerred to

the in-entory raud, belie-ingure/icO /as a/are o it$

N ure/icO then too< matters into his o/n hands and inormed thecompany9s legal counsel$

In ebruary 477, HMI issued a press release indicating that irregularitieshad been disco-ered in the company9s accounting records$

N hat press release sent HMI9s stoc< price spiraling do/n/ard andprompted B6. *eidman to /ithdra/ its audit opinion on the companys477+ 1nancial statements$


12/19


13/19

ter ;eleased he udit oinancial ;eport (Cont9d)

11/17/15

he attorneys or HMI9s stocimately "K% million and that B6. *eidman /asresponsible or %+ percent o those damages$

In .ctober 477%, another healthcare 1rm ac=uired HMI or a nominalamount$


14/19

;ed lags Crooimately "##,### in total$

N hat amount /as our times larger than the appro>imately "4,###B.. *eidman recei-ed or perorming the 477+ HMI audit$

he principal ob!ecti-e o the plaintif attorneys /as to con-ince the !urythat the auditors, at a minimum, had rec


15/19


16/19

Question 4

4$ B6. *eidman9s attorneys pointed outcorrectly that proessional standards donot prohibit auditors and client

personnel rom being ?riendsA$ t /hatpoint do such relationships result in-iolations o the auditor indepencenerules and guidelinesR Pro-ide

hypothetical e>amples to strengthenyour ans/er


17/19

ns/er

* 4##$& : *etiap Pra


18/19

Question

ccording to court testimony on uly #, 47++,6re/ Bregman recommended to HMI9sboard o directors that Mei2ya2sai be hired

as the company9s chie o accounting$ .ne/ee< later, B6. *eidman issued its auditreport on HMI9s 477+ 1nancial statements$Fnder presently e>isting proesional

standards /ould this situation ha-epresented an indepence ?problemA or B6.seidmanR 6eend your ans/er


19/19

ns/er

* 4##$& : *etiap Pra

Hmi - Ridwan- Lh

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