1
Boeing Audit Case
At the beginning of 2007 Neumann and Tides were transferred to Boeing’s internal audit
department. Their job was to monitor the IT controls of the company; however, this required a lot
of manpower, so Boeing also contracted with PwC for additional help for their team. They
weren’t in these new positions long before they began to realize how stressful their positions
were. They were constantly worried that their auditors, Deloitte, would find some material
weaknesses that they missed causing major adverse consequences. As they progressed in their
new positions, they each found internal control weaknesses that they brought to their superior’s
attention. Though they brought it up many times, their superiors did not do anything about the
internal control weaknesses.
As the concerns grew, a reporter was looking into some internal control problems at
Boeing. Neumann and Tides did end up talking to the reporters, which goes against Boeing’s
policy. When the reporter publishes the story Boeing has their suspicions that Neumann and
Tides are behind the leak, so they monitor their computers and IT for proof of what they suspect.
Since they broke policy, the two employees are fired. Neumann and Tides go to court to try and
defend their actions, but they have no success even after their attorney appeals to the U.S.
Supreme Court.
Unfortunately for Neumann and Tides, they had difficulty finding a job that compares to
their previous jobs at Boeing after this incident. The Economist would go on to suggest that SOX
should strengthen its statutes to protect whistleblowers more effectively.
Questions
2
1 . T h e C O S O i n t e r n a l c o n t r o l f r a m e w o r k i d e n t i f i e s
o f t h o s e c o m p o n e n t s i s m o s t r e l e v a n t t o t h e p r o
c o m p a n i e s e s t a b l i s h t o e n a b l e , i f n o t e n c o u r a g e
a . T h e f i v e C O S O i n t e r n a l c o n t r o l c o m p o n e n t s a r e
A s s e s s m e n t , C o n t r o l A c t i v i t i e s , I n f o r m a t i o n a n d
A c t i v i t i e s ( L a w s o n e t a l . , 2 0 1 7 ) .
i . “ T h e c o n t r o l e n v i r o n m e n t i s t h e s e t o f s t a n d a r d
t h a t p r o v i d e t h e b a s i s f o r c a r r y i n g o u t i n t e r n a l
o r g a n i z a t i o n ” ( C o m m i t t e e o f S p o n s o r i n g O r g a n i z
C o m m i s s i o n I n t e r n a l C o n t r o l - I n t e g r a t e d F r a m e w
2 0 1 3 ) .
i i . “ R i s k a s s e s s m e n t i n v o l v e s a d y n a m i c a n d i t e r a
a n d a s s e s s i n g r i s k s t o t h e a c h i e v e m e n t o f o b j e c
S p o n s o r i n g O r g a n i z a t i o n s o f t h e T r e a d w a y C o m m
I n t e g r a t e d F r a m e w o r k E x e c u t i v e S u m m a r y , 2 0 1 3 )
i i i . “ C o n t r o l a c t i v i t i e s a r e t h e a c t i o n s e s t a b l i s h e
p r o c e d u r e s t h a t h e l p e n s u r e t h a t m a n a g e m e n t ’ s
t h e a c h i e v e m e n t o f o b j e c t i v e s a r e c a r r i e d o u t ” (
O r g a n i z a t i o n s o f t h e T r e a d w a y C o m m i s s i o n I n t e r
F r a m e w o r k E x e c u t i v e S u m m a r y , 2 0 1 3 ) .
i v . “ I n f o r m a t i o n i s n e c e s s a r y f o r t h e e n t i t y t o c a
r e s p o n s i v i t i e s t o s u p p o r t t h e a c h i e v e m e n t o f i t s
C o m m u n i c a t i o n i s t h e c o n t i n u a l i t e r a t i v e p r o c e s
3
2 .
o b t a i n i n g n e c e s s a r y i n f o r m a t i o n ” ( C o m m i t t e e o
O r g a n i z a t i o n s o f t h e T r e a d w a y C o m m i s s i o n I n t
F r a m e w o r k E x e c u t i v e S u m m a r y , 2 0 1 3 )
v . M o n i t o r i n g a c t i v i t i e s i n c l u d e “ o n g o i n g e v a l u
s o m e c o m b i n a t i o n o f t h e t w o a r e u s e d t o a s c e r
c o m p o n e n t s o f i n t e r n a l c o n t r o l , i n c l u d i n g c o n t
w i t h i n e a c h c o m p o n e n t , i s p r e s e n t a n d f u n c t i o
S p o n s o r i n g O r g a n i z a t i o n s o f t h e T r e a d w a y C o m
I n t e g r a t e d F r a m e w o r k E x e c u t i v e S u m m a r y , 2 0 1 3
b . O u t o f t h e 5 i n t e r n a l c o n t r o l f r a m e w o r k i d e n
i n f o r m a t i o n a n d c o m m u n i c a t i o n i s m o s t r e l e v a
m a n d a t e s p u b l i c c o m p a n i e s h a v e a p r o c e d u r e i
w h i s t l e b l o w i n g p r o c e s s f o r c o r p o r a t e e m p l o y e e
S O X i s t r y i n g t o m a k e s u r e t h a t t h e e m p l o y e e s
t h e y f e e l i s i m p o r t a n t t o t h e h i g h e r - u p s o f t h e
E x p l a i n t h e d i f f e r e n c e b e t w e e n a “ s i g n i f i c a n t d e
i n t e r n a l c o n t r o l . P r o v i d e a n e x a m p l e o f e a c h .
a . “ T h e d i f f e r e n c e b e t w e e n a m a t e r i a l w e a k n e s s a
s u b j e c t i v e ” ( W h i t e h o u s e , 2 0 1 6 ) .
b . A s i g n i f i c a n t c o n t r o l d e f i c i e n c y i s d e f i n e d a s
d e f i c i e n c y , o r c o m b i n a t i o n o f c o n t r o l d e f i c i e n c i
c o m p a n y ' s a b i l i t y t o i n i t i a t e , a u t h o r i z e , r e c o r d ,
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4
3 . A s s u m e t h a t t h e P w C c o n t r a c t a u d i t o r s d i d , i n
f a c t , e x e r t “ m a n a g e r i a l a u t h o r i t y ” o v e r
B o e i n g e m p l o y e e s ? W h a t i n t e r n a l c o n t r o l
p r o b l e m s o r i s s u e s w o u l d t h a t h a v e p o s e d f o r
g p p
t h e r e i s m o r e t h a n a r e m o t e l i k e l i h o o d t h a t a
m i s s t a t e m e n t o f t h e c o m p a n y ' s
a n n u a l o r i n t e r i m f i n a n c i a l s t a t e m e n t s t h a t i s m o r e
t h a n i n c o n s e q u e n t i a l w i l l n o t
b e p r e v e n t e d o r d e t e c t e d ” ( A U 3 2 5 c o m m u n i c a t i o n s
a b o u t c o n t r o l d e f i c i e n c i e s i n
a n a u d i t o f f i n a n c i a l s t a t e m e n t s p r e v i o u s v e r s i o n ,
n . d . )
c . O n t h e o t h e r h a n d , a m a t e r i a l w e a k n e s s i s d e f i n e d
a s “ a s i g n i f i c a n t d e f i c i e n c y , o r
c o m b i n a t i o n o f s i g n i f i c a n t d e f i c i e n c i e s , t h a t r e s u l t s
i n m o r e t h a n a r e m o t e
l i k e l i h o o d t h a t a m a t e r i a l m i s s t a t e m e n t o f t h e
a n n u a l o r i n t e r i m f i n a n c i a l
s t a t e m e n t s w i l l n o t b e p r e v e n t e d o r d e t e c t e d ” ( A U
3 2 5 c o m m u n i c a t i o n s a b o u t
c o n t r o l d e f i c i e n c i e s i n a n a u d i t o f f i n a n c i a l
s t a t e m e n t s p r e v i o u s v e r s i o n , n . d . )
d . A n e x a m p l e o f a s i g n i f i c a n t d e f i c i e n c y w o u l d b e i f
a c o m p a n y ’ s c o m p u t e r s y s t e m w a s n o t a b l e t o
p r o t e c t i t s e l f f r o m s o m e o n e t r y i n g t o h a c k i n t o t h e
c o m p u t e r o r t h e
n e t w o r k . T h e c o m p u t e r s y s t e m s h o u l d h a v e
m e a s u r e s i n p l a c e t o p r o t e c t i t s e l f
f r o m p o t e n t i a l l y t h r e a t e n i n g s i t u a t i o n s .
e . A n e x a m p l e o f a m a t e r i a l w e a k n e s s w o u l d b e i f
t h e c o m p u t e r s y s t e m d i d n o t h a v e m e a s u r e s i n
p l a c e t o p r e v e n t s o m e o n e f r o m m a k i n g a s i m p l e
e r r o r w h e n e n t e r i n g
t h e a c c o u n t i n g i n f o r m a t i o n . T h i s l a c k o f
p r e v e n t a t i v e m e a s u r e s w o u l d a l l o w
s o m e o n e f r o m a c c i d e n t a l l y r e c o r d i n g i n c o r r e c t
i n f o r m a t i o n .
5
a . “ A u d i t c o m m i t t e e s p l a y a v i t a l r o l e i n t h e
f i n a n c i a l r e p o r t i n g s y s t e m t h r o u g h t h e i r
o v e r s i g h t o f f i n a n c i a l r e p o r t i n g , i n c l u d i n g t h e
i n t e r n a l c o n t r o l o v e r f i n a n c i a l
r e p o r t i n g ( I C F R ) a n d t h e e x t e r n a l ,
i n d e p e n d e n t a u d i t p r o c e s s ” ( C l a y t o n e t a l . ,
2 0 1 9 ) . I f t h e P w C c o n t r a c t a u d i t o r s d i d e x e r t
m a n a g e r i a l a u t h o r i t y o f B o e i n g s
e m p l o y e e s , t h e n t h i s c o u l d i n h i b i t t h e i n t e r n a l
e m p l o y e e ’ s a b i l i t y t o d o t h e i r j o b .
A n i n t e r n a l e m p l o y e e i s l i k e l y g o i n g t o k n o w
m o r e a b o u t t h e c o m p a n y ; i f t h e 3 r d
p a r t y e m p l o y e e s a r e i n c h a r g e i t i s p o s s i b l e
t h a t t h e y w o u l d m a k e s o m e
u n i n f o r m e d d e c i s i o n s .
b . A d d i t i o n a l l y , t h i s c o u l d l e s s e n t h e v a l i d i t y
o f t h e i n t e r n a l a u d i t . I f a 3 r d p a r t y
e m p l o y e e i s r e c e i v i n g c o m p e n s a t i o n f o r t h e i r
w o r k t o f i n d w e a k n e s s e s i n t h e
c o m p a n y ’ s i n t e r n a l c o n t r o l s , t h e y c o u l d b e
i n c e n t i v i z e d t o n o t f i n d a n y w e a k n e s s e s
i n o r d e r t o k e e p t h e i r e m p l o y e r h a p p y .
( B i s h o p , 2 0 0 3 )
4 . W o u l d i t h a v e b e e n u n e t h i c a l o r o t h e r w i s e
i n a p p r o p r i a t e f o r N e u m a n n a n d T i d e s t o h a v e
d i r e c t l y c o m m u n i c a t e d t h e i r c o n c e r n s r e g a r d i n g
B o e i n g ’ s I T c o n t r o l s t o t h e c o m p a n y ’ s D e l o i t t e
a u d i t o r s ? E x p l a i n . A s s u m i n g t h a t N e u m a n n a n d
T i d e s h a d d o n e j u s t t h a t , h o w
s h o u l d t h e D e l o i t t e a u d i t o r s h a v e r e s p o n d e d ?
a . N e u m a n n a n d T i d e s ’ j o b a t B o e i n g w a s t o
c o m m u n i c a t e t h e s e c o n c e r n s a b o u t
B o e i n g ’ s I T c o n t r o l s t o t h e c o m p a n y . A s p a r t o f t h e
i n t e r n a l a u d i t p r o c e s s , a n d t h e
e m p l o y e e s w h o h a v e a p p r o p r i a t e k n o w l e d g e o f t h e
c o m p a n y , t h e c u l t u r e , a n d t h e
r e l e v a n t p r o c e s s e s t h e i r j o b w a s t o s p o t t h e s e
c o n c e r n s a n d c o m m u n i c a t e t h e m .
6
b .
t h e i r n e x t b e s t o p t i o n ( A b o u t I n t e r n a l A u d i t i
2 0 1 6 ) .
I f N e u m a n n a n d T i d e s h a d c o m m u n i c a t e d t h e
a u d i t o r s o f B o e i n g , D e l o i t t e s h o u l d h a v e t a k e
c o n c e r n s w i t h c a r e f u l c o n s i d e r a t i o n ( A b o u t I
5 . W h y d o y o u b e l i e v e t h a t S O X d o e s n o t p r o v i d e l e
w h i s t l e b l o w e r s w h o a r e p u n i s h e d b y t h e i r e m p l o y e
o f t h e n e w s m e d i a ?
a . I n m y o p i n i o n , o n e p o s s i b l e r e a s o n t h a t S O X d o e
c o r p o r a t e w h i s t l e b l o w e r s w h o a r e p u n i s h e d f o r g o
n o t w a n t t o e n c o u r a g e e m p l o y e e s t o t a k e t h i s t y p
t h e o r y , i t w o u l d b e e a s i e r f o r a c o m p a n y t o h a n d l e
d e a l i n g w i t h t h e p r e s s . I t w o u l d a l s o p r e v e n t a n y
f r o m t h e b a d p r e s s . U n f o r t u n a t e l y , t h i s w o u l d l i k e
c o m i n g o u t i n s o m e s i t u a t i o n s
6 . W a s i t e t h i c a l f o r B o e i n g t o m o n i t o r t h e c o m p u t
d u r i n g t h e i n v e s t i g a t i o n t o d e t e r m i n e w h e t h e r o n
c o m m u n i c a t i n g w i t h m e m b e r s o f t h e n e w s m e d i a ?
a . I t i s m y o p i n i o n t h a t i t w a s e t h i c a l f o r B o e i n g t
o f N e u m a n n a n d T i d e s . T h i s i s a s s u m i n g t h a t t h e c
t h e e m p l o y e e s ' w o r k e m a i l s a n d t h e i r c o m p a n y c o m
7
Christian World View
In the Boeing case, there was a severe lack of trust on all sides. The Bible says, “When I
am afraid, I put my trust in you” (English Standard Version Bible, 2001, Psalm 56:3). If the
employees had been able to trust Boeing to correct the problems that they found then they would
not have felt the need to go to the media. If Boeing had felt that they could trust the employees,
then they would not have felt the need to spy on their activity.
The Bible also says “Let every person be subject to the governing authorities. For there is
no authority except from God, and those that exist have been instituted by God” (English
Standard Version Bible, 2001, Romans 13:1). Even though the employees felt they had no other
option, they should not have broken the rules that governed them.
s i g n e d t h e s t a n d a r d p o l i c i e s t h a t m o s t c o m p
t h e c o m p a n y b e i n g a b l e t o m o n i t o r t h e e m p l o
c a s e , B o e i n g h a d e v e r y r i g h t t o i n v e s t i g a t e t
b r o k e t h e i r p o l i c i e s a b o u t s p e a k i n g t o t h e m
8
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