What internal control problems or issues would that have posed for Boeing?

What internal control problems or issues would that have posed for Boeing?

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June 5, 2022
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EPILOGUE

In October 2011, the Supreme Court refused to review the prior rulings handed down in Neumann and Tides’ whistleblower lawsuits, meaning that those rulings would stand. Several groups that advocate for enhanced transparency on the part of public corporations were dismayed by the Supreme Court’s decision. A representative of the National Whistleblowers Center argued that the outcome of the Neumann-Tides case would have a “chilling effect”8 on corporate whistleblowers in the future. Other critics of the Supreme Court’s decision and the earlier rulings in the case pointed out that many large-scale frauds, including the Enron and Madoff Securities scandals, surfaced only after persistent journalists reported allegations communicated to them by corporate insiders or other parties.

Following the Supreme Court’s refusal to review Neumann and Tides’ case, the prominent business publication The Economist suggested that the whistleblowing protections included in the SOX statute are largely ineffective and need to be strengthened. According to that publication, of nearly 1,900 whistleblowing complaints filed under SOX by mid-2012, only 317 had been resolved in favor of the complainants.9

Similar to many, if not most, corporate whistleblowers, Neumann and Tides had difficulty obtaining jobs after they were dismissed by their employer. In May 2011, their attorney noted on his website that they “both are finally working again, but at significantly reduced salaries.”10

When asked to comment on the Boeing whistleblowing incident following the dismissal of Neumann and Tides’ lawsuit, Andrea James expressed regret that they were fired as a result of her newspaper article. “It is hard for me to talk about because I feel bad. And . . . there’s nothing I can do.”11 James also revealed that her article was based upon “discussions with dozens of people”12 and she was unsure why Neumann and Tides were singled out for punishment by Boeing. “That’s always puzzled me. But it’s clear that they [Boeing] made an example out of them.”13

Assume that the PwC contract auditors did, in fact, exert “managerial authority” over Boeing employees? What internal control problems or issues would that have posed for Boeing?

________

7. J. J. Tollefsen, “Tides and Neumann v. The Boeing Company, Petition for Writ of Certiorari.”

8. National Whistleblowers Center, “9th Circuit Whistleblowers Barred from Talking to the Press,” www.whistleblowers.org, 4 May 2011.

9. The Economist, “Sacked for Telling Tales,” www.economist.com, 7 July 2011.

10. P. Murphy, “Whistleblowers and Sarbanes-Oxley Fallout,” www.tollefsenlaw.com, 17 May 2011.

11. Ibid.

12. Ibid.

13. Ibid.

Answer and ExplanationSolution by a verified expert

Explanation
Well elaborated

Answer
Even if the PwC contract auditors did not exercise "managerial authority" over Boeing personnel, this would have resulted in an immediate and major internal control issue for the company. Due to the fact that the auditors would have been in a position to influence or control the behavior of Boeing's workers, it is possible that they would have been able to falsify Boeing's financial statements in order to provide a more positive image of the company's financial health. Additionally, if the auditors were able to exert control or influence over the conduct of the workers, this might have resulted in a lack of independence on the side of the employees, which would have been shown in Boeing's financial accounts as a result of the audit.

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