Berkshire Hathaway Auditing Case Analysis

1. Warren Buffett is a world-wide known business investor and philanthropist, born in Omaha, Nebraska in 1930. Buffet is the CEO of Berkshire Hathaway and continually finds himself towards the top of the list of weathiest people in the World. He is dubbed as the most successful investor of the 20th century, which is why he is commonly referred to for opinions on economics, tax codes, and other global issues. I'm not as familiar with his ethical standpoints on business as most people might be, but after reading his opinion on business ethics, Berkshire Hathaway's ethical standpoint, as well as that Mr. Buffett has pledged to give back 99% of his wealth during his lifetime or at the time of his death. I am left with the impression that he is indeed an ethical businessman, passed some recent articles on insider trading by his apparent one-time heir, due to the quote,

"The priority is that all of us continue to zealously guard Berkshire’s reputation. We can’t be perfect but we can try to be. As I’ve said in these memos for more than 25 years: We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation."

2. In the Berkshire Hathaway Case, Berkshire Hathaway has differing views than their auditing team, Peat Marwick, of how to treat two stock buy-back plans in the year of 1983 and 1984. Berkshire Hathaway wishes to classify both transactions as proportionate redemption transactions rather than sale of stock leaving the company with a higher yield of revenue, as opposed to only reporting the capital gains as revenue. As an auditor, it is important to know what is material and what is not. What is material, may fluctuate between companies due to each company’s financial reports being composed of different factors and entities. This is important to determine what is material for each company, because when an error is discovered, if it is material, the auditors must report it and act appropriately. So, Peat...