Accounting Financial Analysis Report on Cardinal Health Case Study

This report analyzes the Cardinal Health case study, focusing on the company's financial practices and the controversies surrounding them. The analysis examines the justification for deducting litigation gains from the cost of goods sold and why the company chose this method. It clarifies the meaning of the phrase "not steal from Q3" in the context of the company's financial strategy. The report details the actions that led to SEC violations, including the timing of the gains and the company's defense of these decisions. It also assesses the severity of the senior managers' actions, considering the $22 million settlement and the overall impact of the company's behavior. The report concludes by classifying Cardinal Health's behavior based on its ethical and financial implications. The analysis draws on the case study and relevant academic literature to provide a comprehensive understanding of the events and their consequences.

Running head: ACCOUNTING FINANCIAL ANALYSIS REPORT
Accounting financial analysis report
Name of the student
Name of the university
Authors note

1
ACCOUNTING FINANCIAL ANALYSIS REPORT
Table of Contents
Executive summary:.......................................................................................................2
Answer to question 1..................................................................................................2
Answer to question 2..................................................................................................2
Answer to question 3..................................................................................................3
Answer to question 4:.................................................................................................3
Answer to question 5..................................................................................................3
References:.....................................................................................................................4

2
ACCOUNTING FINANCIAL ANALYSIS REPORT

3
ACCOUNTING FINANCIAL ANALYSIS REPORT
Executive summary:
Answer to question 1
Cardinal health limited is world’s second largest vitamin manufacturer and distributor
as well as having a vast reach over the clients of all over the world. However the company
had been doing good business until a case have occurred with the company and they had
faced a lot of problems regarding the production and business operation. The trouble had
started in October, 2000 when the senior managers of cardinal proceeds from the settlement
and provided a litigation gain however the purpose of the gain will be to close the gaps in the
budgeted earnings for the second year. However the company went for a litigation gain rather
than going for another process because they want to win it with law and does not want to
make this public. Hence the litigation will be the only way to go for (Brazier & Tsuchiya
2015).
Answer to question 2
Since the company had their focus on the producing the vitamins for clients and they
had made a good amount of business out of it. However the senior manager of the company
had began to expect a portion of it in full settlement of the business over the litigation gain. In
the second quarter the company sent a mail to the company executive officials stating to stick
to the original process rather than changing the basics and implementing new process. The
response to the term not steal from Q3 refers to the changes in the policies which the
company could implement within the business after facing the allegations. It means that the
company will manage the things from the second quarter itself and not bring money from the
third quarter (Bellinger, 2016).

4
ACCOUNTING FINANCIAL ANALYSIS REPORT
Answer to question 3
In 26th July, 2007 after doing the business successfully with the clients and meeting all
their requirements the US Securities and Exchange Commission (SEC) had accused that the
company had violated the rules and regulations of GAAP by prematurely recognising gains
from the provisional lawsuits filed against different manufactures. However the company had
agreed to pay $600 million to the company shareholders who bought the stocks between 2000
to 2004. The main reason behind the allegation is wrongly gain of money in the financial year
and showcase of unnecessary profits to the company (Wang et al., 2018).
Answer to question 4:
On 31st December cardinal company had recorded a contingent litigation gain of 10
million to the reduction of the cost of sales and in the same quarter the company had also
estimated a a profit of 0.02%. However PWC had been assigned as an auditor of the cardinal
company, on the last day of the first quarter the company shown 10 million gain and have
been unable to segregate the value as per recommended by PWC (Yassi et al., 2013). In the
next quarter the company showed a profit of 12 million and to cover the mislead, they have
adjusted the value by showing 22 million in the quarter. This had lead the company to get
accused of.
Answer to question 5
The company had intentionally mislead the people and the auditors as well as wrongly
covered the problem to get safe. If it had to get rated from rank 1 to rank 10, then probably
the companies case had come under rank 10 since they had offensively cheat people.

5
ACCOUNTING FINANCIAL ANALYSIS REPORT
References:
Bellinger, D. C. (2016). Lead contamination in Flint—an abject failure to protect public
health. New England Journal of Medicine, 374(12), 1101-1103.
Brazier, J., & Tsuchiya, A. (2015). Improving cross-sector comparisons: going beyond the
health-related QALY. Applied health economics and health policy, 13(6), 557-565.
Wang, Y., Kung, L., Wang, W. Y. C., & Cegielski, C. G. (2018). An integrated big data
analytics-enabled transformation model: Application to health care. Information &
Management, 55(1), 64-79.
Yassi, A., Breilh, J., Dharamsi, S., Lockhart, K., & Spiegel, J. M. (2013). The ethics of ethics
reviews in global health research: case studies applying a new paradigm. Journal of
Academic Ethics, 11(2), 83-101.