Case ID: 105082     Solution ID: 9154     Words: 1447 Price $ 75

Financial Reporting Problems at Molex Inc A Case Solution

Case Solution

Taking after a bookkeeping issue at Molex, the company's evaluators solicitation changes in administration. The top managerial staff needs to choose whether the examiners' worries have merit or whether, as administration contends, the bookkeeping issue is unimportant.

Excel Calculations

·         EPS with and Without Error Correction  

·         EPS for 2004      

·         Scenario 1          

·         All Error is reversed        

·         Resulting EPS    

·         %age EPS Change           

·         Scenario 2          

·         Only 2004 Error is Reversed        

·         Resulting EPS    

·         %age EPS Change  

Questions Covered

1. Why does Molex have to hire an external auditor?

2. What was the financial reporting problem at Molex? How would the correction of the problem be recorded in Molex's financial statements?

3. What factors do you think influenced management's decision not to raise the issue with the auditors?

4. Why were Molex's auditors so concerned about the reporting problem at Molex? If you were a member of the board, would you agree with their concerns?

5. As a member of Molex's board, what would you do to respond to the auditor's request that the CFO (and possibly the CEO) be replaced?