Case 1.1

Waste Management: The Expense Recognition Principle

Q.#5 Visit the PCAOB website (i.e., www.pcaob.org), search for the "tip and referral center" and review the guidelines. Can you report a violation to the PCAOB anonymously? Next, consider the role of the Waste Management employee who was responsible for recording the proper amount of depreciation expense in the financial statments. Assuming that the employee knew that the consolidating entries in the fourth quater recorded by upper management were fraudulent, do you believe that the employee had a responsibility to report the behavior to the audit committee? Why or why not?