Enforcing Financial Reporting Standards: The Case of White ...

power to sanction a company, e.g. by levying a fine, and counts on the loss of reputation that
is associated with the publication of an error finding.
2. While the last questions presented conceptual considerations of the enforcement of
accounting standards in Germany, this task expects students to analyze the case study based
on the theoretical background. They are required to assess implications of the examination
and demonstrate their ability to evaluate possible outcomes. At the same time, students can
discuss pros and cons of White Pharmaceuticals’ and Peter’s behavior while presenting
recommendations for them. Students should also be encouraged to reflect on aspects of crisis
management.
Solutions:
(1) Possible responses can be derived from Figure 1. White Pharmaceuticals AG can either
accept or oppose the error finding. Acknowledging the error finding would lead to a
publication of the finding in the German Federal Gazette. If they opposed the finding, the
examination would be referred to BaFin who conducts their own examination. Again, White
would have the option of accepting or opposing a finding. If the company still did not accept
the finding, the final decision would be taken by the Higher Regional Court Tribunal
(Oberlandesgericht) in Frankfurt / Main.
This summary already implies that the process uses a high level of corporate resources
if a company wants to assert their position. Thus, a company needs to assess their success rate
before they choose to object a finding by the FREP. The case presents strong indications that
White did indeed make a mistake in expensing the lump-sum payment. Also, both BaFin as
well as the court are generally not interested in weakening FREP’s position. A reversal of the
finding would not only undermine the FREP’s standing but would also lead to a higher
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