Metaluna,Inc

question 77

Essay

Metaluna,Inc.,is a new software company that recently began operations in 2003.Metaluna's stock is publicly traded.Listed below are several statements made recently by the CEO and Chairman of the Board of Metaluna at a directors meeting.
Required: Please comment on each statement in light of the requirements imposed by the Sarbanes-Oxley Act (SOA)of 2002.
a."I would like our external auditors to have a major role in our financial systems design and implementation in the future.They seem like a good group of knowledgeable individuals who I believe can help us in this area."
b."As you know,our controller resigned from her position this week.I would like to see if someone from the auditing firm who worked on our most recent audit would be interested in coming 'on board' with us."
c."I am ready to approve a $20,000 company loan to our CIO to help him send his daughter to Stanford in the fall."
d."The audit committee has suggested that a new auditing firm be hired after completion of our current audit.I would like the board to make a resolution giving me sole discretion and authorization in this matter,since I believe I am better qualified to make such a decision."

---

Definitions:

Initial Investment

The initial amount of money spent to start a project, investment, or business, often including costs such as purchasing equipment, property, or technology.

Internal Rate of Return

The discount rate at which the net present value of all the cash flows from an investment or project equals zero, used as a gauge for its profitability.

Working Capital

The amount of current assets minus current liabilities, indicating the liquidity of a business.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period, used in capital budgeting to assess the profitability of an investment.