Eastman Kodak Company Essay

ACC562 Advanced Audit – Assignment 4 " Eastman Kodak Company” Evaluate the current financial condition of Eastman Kodak based on it is most recent quarterly report, which can be located at http://www.Kodak.com. Based on your evaluation, discuss the most significant " red flags” for its open public accounting organization to consider. After evaluating Securities and Exchange Commission rate Form 10-Q report fled with Washington, D. C. 20549 it truly is evident that Eastman Kodak Company can be experiencing significant financial problems. On January 19, 2012 Eastman Kodak and its subsidiaries filed a voluntary petition for relief under part 11 states Bankruptcy Code. Under this kind of code the company will always operate in the ordinary span of business. (Veronda, 2012) The reason behind filing phase 11 was obviously a fact, the Kodak received loss for 3 years in a row-2009, 2010, 2011 and three months inside the first 1 / 4 of 2012 ended in March 23, 2012 and is considered to be operated their organization as " debtor-in-possession”. In order to understand the cause of the issues it is important to point out that Kodak operates in the highly competitive industry, like the one exactly where less and less people buying digital cameras and replacing them with digital camera models in cellular phones, iPods, and IPad and various other gadgets equipped with video cameras. Additional areas of decline had been experienced in traditional organization and a $61 million reduction in income associated with tax refund posting. Such bad conditions can impact budget, results of operations and cash goes and may continue to do so in the future. (Veronda, 2012) To improve its financial functionality and add competitive challenges the company is making a strategic prepare, whose effective implementation can be subject to many risks and uncertainties. Eastman Kodak reported that its strategy of focusing on its most rewarding business and strengthened expense controls led to profitability improvements in both these styles its business segments along with increased funds balance. The Selling, General & Administrative expenses reduced by $84 million and Kodak reduced its purchases of unprofitable organization lines and consolidated in to two organization segments- Commercial and Consumer. The improvement in the cash flow were due to a tax repayment from Korean language withholding fees recorded in the quarter being a $122 million income tax profit. (Veronda, 2012) The consolidated financial statements were ready with presumption that the firm will continue to operate as being a going matter. The public accounting firm must look into this company as a high risk, due to decline within a business from its various sectors and cost erosion about plates as a result of industry overburden. (Veronda, 2012) 2 . Assume that you would be the PricewaterhouseCoopers taxation engagement spouse and have assessed Kodak being a high-risk client. Explain the modification you would probably make for the audit proposal procedures to minimize any potential liability from the firm. Right now there auditors ought to properly prepare engagements especially with a high risk client to remain the examine costs affordable and to steer clear of misunderstandings with client. During initial taxation planning I would decide if to keep Kodak as a client or not really based on my own earlier experience. This decision should be built early prior to any price has been sustained. Few crucial points in minimizing legal exposure:

•I would emphasize compliance with ISAs, Code of Professional ethics and GAAP •Thoroughly investigate potential clients

•exercise alert due financial difficulties

•Establish and comply with internal regulates procedures

•Use clear proposal letters- opportunity & responsibilities •Conduct taxation with specialist skepticism

•Consultation with more experienced auditors about difficult issues •Maintain professional liability insurance coverage

• Search for legal counsel whenever serious concerns occur (" 10 ways to, " 2011) There are two risk...

References: Veronda, C. (2012, 04 27). Kodak's 1st one fourth results demonstrate improvement in segment earnings and decreased operating costs. Retrieved via http://files.shareholder.com/downloads/EK/1916380967x0x563960/63839d58-a67b-4545-b7c1-8b5bab56add3/1Q12 Kodaks Sales and Earnings. pdf file

110 ways to reduce specialist liability upon audits, reviews and compilations. (2011, Feb 27). Gathered from http://www.accountingweb.com/blogs/cpapastr/today039s-world-audits/10-ways-reduce-professional-liability-audits-reviews-and-compi

2 . Montenegro, C. (n. d. ). Auditor's legal liability. Retrieved from http://www.scribd.com/doc/42903270/11-Auditor's-Legal-Liability

3. Pricewaterhousecoopers LLP 2011 transparency survey. (2011). Retrieved from http://www.pwc.com/en_US/us/about-us/assets/pwc-us-tr-fy11.pdf

4. Hansen, G. (2010, October 22). Audit fees and involvement profitability: A threats and safeguards approach to strengthen compliance with standards of moral behavior. Gathered from http://www.nasba.org/files/2011/03/Ethics_and_Strategic_Issues_Discussion-22Oct20.pdf

Potsch, I. (2012, January 14). Economical risk management. Gathered from http://www.xing.com/net/financialriskmanagement/any-other-business-780/eastman-kodak-39400509

Internal control practices: Cash. (2009, 12 , 11). Recovered from http://blink.ucsd.edu/finance/accountability/controls/practices/cash.html

McGrane, M. (n. d. ). The audit panel: Director responsibility in the wake of the Sarbanes-Oxley. Retrieved coming from http://www.lawschool.cornell.edu/research/JLPP/upload/CJP207-3.pdf

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