Betale Godt Ltd (BG) is a prominent company in the credit card processing sector. It operated...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Betale Godt Ltd ("BG") is a prominent company in the credit card processing sector. It operated as a merchant bank, connecting retail merchants with cardholders' financial institutions like Commonwealth Bank and ANZ. Prior to the 2023 data breach, BG served over 200,000 retail merchants and ranked as the fifth-largest independent credit card servicer in Australia. The company relied heavily on the growing trend of consumers using credit cards for their purchases. For every hypothetical $100 credit card transaction, BG earned $2.98 in total revenue and $0.83 in gross profit. On Friday, July 7, 2023, the audit team arrived at BG's office and received the news that BG had expenenced a data breach. The exact nature and severity of the breach were not clear at that time, but the audit team considered it a significant concern for the audit engagement. It was discovered that hackers had gained unauthorized access to credit and debit card data starting from August 2022, but the company only became aware of this in July 2023. Considering that BG processed a substantial number of credit card transactions each year and the hackers potentially had access to several months' worth of data, it was likely that a significant portion of customers' credit and debit card numbers had been stolen. The audit team anticipated that BG, being a merchant bank, might bear the financial responsibility of reimbursing the credit card networks such as Visa and MasterCard for the expenses incurred in issuing new credit cards. The external audit team encountered significant challenges when assessing BG's ability to continue operating as a going concern, as reflected in their financial statements. Given the sensitive nature of the data breach, all discussions related to the data breach and the company's viability were conducted by the audit partner and manager in collaboration with BG's internal and external legal advisors. On one hand, there were multiple factors indicating the potential failure of the company as a going concern. Firstly, BG's stock price plummeted by more than 80 percent during the audit period, spanning from July 1, 2023, to the completion of fieldwork on September 1, 2023. Secondly, the announcement of the data breach led to increased trading volume for BG's stock, indicating heightened scrutiny from the capital markets. Thirdly, while same store sales had i previously shown growth, they experienced a decline of 3.1 percent in the fiscal year of 2022-23. Lastly, there was a significant risk of legal liability that could deplete BG's cash reserves and hinder its ability to raise additional capital. At that time, BG held approximately $40 million in cash and had stockholders' equity valued at around $184164 million. If faced with a similar liability as other data breach lawsuits, estimated at $274 million, the company could potentially face bankruptcy. On the flip side, the auditors had several reasons to believe that BG would remain a going concern. Firstly, the exact extent of legal liability expected in the following year remained uncertain. BG was confronting a securities class action lawsuit as well as lawsuits initiated by credit card companies. However, due to the unpredictable nature of the legal proceedings, it was unclear whether these lawsuits would be successful or resolved within a single calendar year. Secondly, the company did not experience a substantial loss of customers. BG made a noteworthy investment in its sales team, ensuring that they visited the merchants and provided reassurance that their business relationship would persist. Betale Godt Ltd ("BG") is a prominent company in the credit card processing sector. It operated as a merchant bank, connecting retail merchants with cardholders' financial institutions like Commonwealth Bank and ANZ. Prior to the 2023 data breach, BG served over 200,000 retail merchants and ranked as the fifth-largest independent credit card servicer in Australia. The company relied heavily on the growing trend of consumers using credit cards for their purchases. For every hypothetical $100 credit card transaction, BG earned $2.98 in total revenue and $0.83 in gross profit. On Friday, July 7, 2023, the audit team arrived at BG's office and received the news that BG had expenenced a data breach. The exact nature and severity of the breach were not clear at that time, but the audit team considered it a significant concern for the audit engagement. It was discovered that hackers had gained unauthorized access to credit and debit card data starting from August 2022, but the company only became aware of this in July 2023. Considering that BG processed a substantial number of credit card transactions each year and the hackers potentially had access to several months' worth of data, it was likely that a significant portion of customers' credit and debit card numbers had been stolen. The audit team anticipated that BG, being a merchant bank, might bear the financial responsibility of reimbursing the credit card networks such as Visa and MasterCard for the expenses incurred in issuing new credit cards. The external audit team encountered significant challenges when assessing BG's ability to continue operating as a going concern, as reflected in their financial statements. Given the sensitive nature of the data breach, all discussions related to the data breach and the company's viability were conducted by the audit partner and manager in collaboration with BG's internal and external legal advisors. On one hand, there were multiple factors indicating the potential failure of the company as a going concern. Firstly, BG's stock price plummeted by more than 80 percent during the audit period, spanning from July 1, 2023, to the completion of fieldwork on September 1, 2023. Secondly, the announcement of the data breach led to increased trading volume for BG's stock, indicating heightened scrutiny from the capital markets. Thirdly, while same store sales had i previously shown growth, they experienced a decline of 3.1 percent in the fiscal year of 2022-23. Lastly, there was a significant risk of legal liability that could deplete BG's cash reserves and hinder its ability to raise additional capital. At that time, BG held approximately $40 million in cash and had stockholders' equity valued at around $184164 million. If faced with a similar liability as other data breach lawsuits, estimated at $274 million, the company could potentially face bankruptcy. On the flip side, the auditors had several reasons to believe that BG would remain a going concern. Firstly, the exact extent of legal liability expected in the following year remained uncertain. BG was confronting a securities class action lawsuit as well as lawsuits initiated by credit card companies. However, due to the unpredictable nature of the legal proceedings, it was unclear whether these lawsuits would be successful or resolved within a single calendar year. Secondly, the company did not experience a substantial loss of customers. BG made a noteworthy investment in its sales team, ensuring that they visited the merchants and provided reassurance that their business relationship would persist.
Expert Answer:
Answer rating: 100% (QA)
I can offer some general observations based on the information youve provided The situation described for TBetale Godt Ltd BG appears to be complex an... View the full answer
Related Book For
Managers and the Legal Environment Strategies for the 21st Century
ISBN: 978-0324582048
6th Edition
Authors: Constance E Bagley, Diane W Savage
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
XYZ Co is a prominent company in the FMCG industry. It provides 400 different brands spanning 14 categories of home, personal care and foods products. XYZ is now one of the worlds biggest companies....
-
If f(x) = 5x + 1, find and simplify each of the following in Problem. f(f( -1))
-
Jing is considering starting a new business selling organic groceries. It would cost her $350,000 a year to rent store space and buy the groceries from a wholesaler, and she would have to quit her...
-
Annies audit firm has recently won the bidding for the audit of Big Spending, an organization supported by public funds provided from the federal government. Annie has never been involved in an audit...
-
Consider the daily log returns of GE stock from July 3, 1962 to December 31, 1999. The data can be obtained from CRSP or the file "d-geln.dat." Suppose that you hold a long position on the stock...
-
An electronics company that produced circuit boards for personal computers was formed in a small southern town. The three founders had previously worked together for another electronics company and...
-
Excerpts from Candle Corporation's most recent balance sheet ( in thousands of dollars ) appear below: \ table [ [ Current assets:,Year 2 , Year 1 ] , [ Cash , $ 1 6 6 , $ 1 0 0
-
The company has made the following profit-sharing contributions to the retirement plan for Archie and Elaine for each of the related years. 2021 2020 2019 2018 2017 2016 Balance 1/1/16 Archie None...
-
Two common designations for those in the finance field are CFP, which stands for Certified Financial Planner, and CFA, which stands for Chartered Financial Analyst. Typically, CFP professionals help...
-
A bistro needs 15# of EP watermelon for tomorrows service. If the yield percentage of the watermelon is 68%, how many pounds of watermelon must the restaurant order(assuming none currently in...
-
Social Media's Influence on Industry and Competition, Give a thorough and detailed examination of how the industry and the competition can be influenced by social media, including what factors are...
-
A) = Find the output of the following programs: int[] list (0, 1, 2, 3, 4}; int y = 10; for (int i=0; i < 3; i++) { list[list.length/2+1] = ++y; y += 2; } for (int x: list) System.out.println(x); B)...
-
Interstates 1-35 and 1-80 intersect near Ankeny. At 8 AM, Bob starts driving from Des Moines which is 10 miles south of the intersection point. He drives north along I-35 at 60 miles per hour. Alice...
-
Intertrobe common stock paid dividends of $3.53 per share over the most recent 12 months. The consensus expected growth rate of dividends among investment analysts is 2% per year. If the discount...
-
QUESTION 3 Paul experienced several distractions while reading the annual report. These interferences are also known as O miscommunication diffusion split message noise QUESTION 4 Which of the...
-
Which, if any, of the dichloroethene molecules drawn in Data Table II (3.) (4.) and (5.) are geometric isomers? A. B. C. D. cis-1,2-dichloroethene and trans-1,2-dichloroethene...
-
U.S. manufacturers want to bring a suit against Japanese manufacturers, alleging a conspiracy to take over the U.S. automobile industry by exporting low-priced products to the United States while...
-
Jordan Panel Systems Corporation is a construction subcontractor that contracted to install windows at an air cargo facility at John F. Kennedy Airport in New York. Jordan entered into a contract to...
-
Gulender Ozkaya wrote a check for $1,041.55 to pay an automobile dealership for repairs to her car. When she realized that her car had not been properly repaired, Ozkaya stopped payment on the check....
-
No. The break in an investor-owned firm's MCC schedule is due to the higher cost involved with issuing new common stock once the firm's retained earnings has been exhausted. Since not-for-profit...
-
Since not-for-profit businesses are expected to provide a social value in addition to an economic benefit, project analysis must consider social value along with expected cash flows. The summation of...
-
a. Without access to tax-exempt debt, all of the benefits to using debt for a not-for-profit firm would disappear. Thus, in accordance with MM capital structure theory, and considering financial...
Study smarter with the SolutionInn App