Waste Disposal Inc. runs the business to grow aggressive and increase their total assets, profits and the company’s stock price. However, by contemplating WDI’s 1999 financial statement, it suspects to have risks. The accounting for capital assets, net income, and the environmental liability posses the greatest risk of misstatement. These risks will have effect on the business in the future years. WDI needs to reexamine their 1999’s and previous financial statements before they thrive the business.
WDI offsets the realized gain of $110 million from selling interest in business, SM Inc., against unrelated operating expenses and prior-year estimates. Even though it does not increase or decrease in net income, WDI should report this gain in the financial statement as itself instead of offsetting. It seems that WDI tries to look good for making lower expenses; however, it affects future years’ business for figuring out the exact amount of unrelated operating expenses and prior-year estimates. WDI has to be honest with their financial statement for themselves and others, such as stockholders. Also, by recording separately the realized gain and unrelated operating expenses, the company could know exact amount of expenses so that they can adjust their business plan with correct information.
And they have risk of massive amount of equipment and make their fixed assets bigger by the years. In comparison with the Fixed Assets and Total Assets accounts in previous years, this year’s numbers reflect a material change in the growth rate that signals an increased risk of a misstatement. In particular, the Building and Leasehold Improvements account’s growth rate decreased by 4% (14.6% in 1998 to 10.6% in 1999). Meanwhile, the Vehicles and Equipme ...