A deep dive on Meta. This company interests me because of their business structure and
seemingly endless developments. Looking at their 10-K, many of their contingencies involve legal
matters regarding how they obtain and use personal data. There have been many lawsuits filed
against the company and executives with accusations of misuse of data. Apparently, an unnamed
third party obtained this data against their terms and conditions, and now the company is
undergoing several lawsuits for not safeguarding that information. Whether it be about data
breaches, disclosures, or other legal matters regarding information, I am sure many of us are not
surprised that Meta has these contingencies. Meta disclosed these liabilities under "Commitments
and Contingencies", under the Liabilities and Stockholders' Equity section of their balance sheet, as
well as including more detail in the footnotes.
To find out more about the contingencies, auditors can look to the legal documents of the
company, as well as Board meeting minutes. They can examine court documents regarding
pending lawsuits to gain a better understanding of the proceeding. Further, auditors can compare
the liability listed in the balance sheet to the documents to check for accuracy. Auditors should
request all documents related to the contingencies as part of their review, as the footnotes should
be as accurate as possible and include all important and relevant information.
Starbucks. They do have a pending lawsuit. It states in the notes “On April 13, 2010, an
organization named Council for Education and Research on Toxics (“Plaintiff”) filed a lawsuit in the
Superior Court of the State of California, County of Los Angeles, against the Company and certain
other defendants who manufacture, package, distribute or sell brewed coffee. The lawsuit is
captioned Council for Education and Research on Toxics v. Starbucks Corporation, et al. On May 9,
2011, the Plaintiff filed an additional lawsuit in the Superior Court of the State of California,
County of Los Angeles, against the Company and additional defendants who manufacture,
package, distribute or sell packaged coffee. The lawsuit is captioned Council for Education and
Research on Toxics v. Brad Barry LLC, et al. Both cases have since been consolidated and now
include nearly eighty defendants, which constitute the majority of the coffee industry in California.
Plaintiff alleges that the Company and the other defendants failed to provide warnings for their
coffee products of exposure to the chemical acrylamide as required under California Health and
Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of
1986, better known as Proposition 65. Plaintiff seeks equitable relief, including providing warnings
to consumers of coffee products, as well as civil penalties in the amount of the statutory
maximum of two thousand five hundred dollars per day per alleged violation of Proposition 65.
The Plaintiff asserts that every consumed cup of coffee, absent a compliant warning, is equivalent
to a violation under Proposition 65.” While it states this in the notes, note 14, it does not show
this in the statements itself. It also does not state how many days Starbucks could potential have
to by $2,500 for.
One procedure an auditor could use is reading the minutes from meetings. If the board of
directors talked about an uncertain event or events in their meetings then it should show up in
the minutes from their meetings. The auditor can also look at contracts, and loan and lease
agreements. Tax returns can also be reviewed. If the returns from previously years have been
audited by the IRS, then the auditor can use their reports in determining if events will impact
current or previous years. The auditor should also confirm guarantees and letters of credit from
the bank, as well as inspect other documents for guarantees.
Works Cited
(2019). In J. S. William F Messier, Auditing & Assurance Services A Systematic Approach Seventh
Edition. McGraw Hill Education.
Starbucks Corporation. (n.d.). Retrieved from United States Securities and Exchange Commission:
www.sec.gov/ix?doc=/Archives/edgar/data/829224/000082922422000039/sbux-20220703.htm
United States Securities and Exchange Commission. (2022). Meta Platforms, Inc. Form 10-K for
Fiscal Year Ended December 31, 2021. Retrieved from
https://www.sec.gov/ix?doc=/Archives/edgar/data/1326801/000132680122000018/fb-
20211231.htm
