Running head NEGOTIATION PLANNING1 NEGOTIATION PLANNING5.docx

Running head: NEGOTIATION PLANNING 1
NEGOTIATION PLANNING 5
Negotiation Planning
Keisha McKinney
Columbia Southern University
01/07/2020
Negotiation Planning
Negotiation involves an interaction between entities intended in
reaching a beneficial outcome in any organization. Companies
create a guide used in each step which includes a series of
strategies and planning to have a successful negotiation.
Planning for negotiation is essential for various reasons. First,
it enables companies to be proactive in foreseeing their future
and prepare accordingly to keep up with the changing trends in
the market. Secondly, Planning goals and strategies increases

operational efficiency in providing a roadmap in the
management in making decisions by determining the required
resources used in accomplishing the set goals (Ong, 2015).
Deliberate planning also important in increasing profitability
and market share. Corporations get insights that are valuable on
consumer segments and market demands on products and
services, which is the best approach used in turning marketing
and sales efforts into the best outcomes.
Organization negotiators should always have goals and
strategies before negotiation commences. Having goals and
strategies in any preparation for negotiation can portray
negotiators as people with vision and objectives goals of what
they need out of the deal. Lack of negotiation goals in mind by
negotiators may affect the best outcome for the business.
Therefore, getting into negotiation with specific goals and a
clear understanding of business strategies helps to improve
performance in operation. There are various issues discussed
during the negotiation process such as distributive, congruent
and integrative issues (Kesler, 2019). Integrative negotiation is
a strategy involving the collaboration of parties to get a
substantive solution to their disagreement. The tactic focuses on
the development of mutual agreement that is beneficial to the
disputants’ interests. The congruent issue is where the interest
of parties are aligned positively in which both sides are not
willing to state what they need in case of any project
discussion. When negotiators have the same interest on which
project to be given the priority is a congruent issue in
negotiation. Distributive negotiation involves a single issue
such as the cost of the project, and mostly it relates to the
bargaining process.
Defining the relative importance and the bargaining mix of each
issue is a critical step in negotiation. Negotiators from different
parties assemble a list of issues presented and decide on the
most and least important issue to enhance proper priorities.
Bargaining mix entails both parties coming together and
combining their lists of issues in a negotiation before

implementation. Accordingly, large bargaining mixes may
benefit a negotiation because a large list of components are put
together and can easily benefit both parties. Notably, a large
bargaining mix can make the negotiation take a long time to
complete due to considerations of issues of different
combinations (Page & Mukherjee, 2007). Therefore, it is
necessary to set priorities following a long list of issues to
come up with a system of deciding on tangible and intangible
issues that can lead negotiators into the final agreement.
Defining the interest is the next step in planning for a
negotiation. The step is extremely important that requires
negotiators to decide their underlying needs and interest.
Accordingly, a defined interest can be more important to
integrative negotiation since it is process-based and may also
base on other different negotiations. Knowing the interest of
both negotiators and that of another party in a negotiation
makes more sense on certain things, thus paving the way for
easies implementation of mutually agreed on decisions. BATNA
is another step-in planning for the negotiation, which involves
the identifying alternatives that are best to a negotiated
agreement (Spangler, 2012). A good BATNA improves
negotiation power in deal-making and negotiation strategies. If
one party is having the best alternative than the other side, it
becomes easier to push the other side harder by increasing
demands thus making negotiators from the other party to accept
because they do not have a better option. Therefore, negotiators
need to improve their BATNA by considering the alternatives
available on the other side since it is worth revealing to their
opponents during negotiation.
Defining limits is the next step in planning fora negotiation.
Negotiators need to limit their options for more effective
bargaining. More of the choices may not only affect the
effectiveness of discussion but also reduces the quality of
negotiators choices. Limiting the choices is essential for both
parties in seeking out high-quality information that is much
relevant to stand a better chance of winning the opponents in

the negotiation. Understanding the resistance point involves
having minimum terms that negotiators can accept willingly in a
negotiation. Establishing a resistance point before negotiation
includes seeking to understand oneself, the negotiation situation
and the counterparty (Spangler, 2012). The party’s interest,
resistance point and objectives help a negotiator in developing a
strategy and choose tactics towards the best achievement.
Having a reservation point in negotiation is the best
understanding of the strength and nature of each party’s
interests, their BATNA and the cost of delay by each party.
Setting targets leading to negotiation is a critical step of
reaching the optimum agreements with the counterpart. The
process of setting targets involves various actions such as
focusing closely, taking many risks and ethical behaviors. Set
goals focus on negotiator’s attention on a task. However, the
too-close focus may make negotiators overlook other important
tasks and issues. Setting challenging negotiation targets is also
important in motivating negotiators to work hard towards the
achievement (Staff, 2019). Accordingly, the targets should not
be too difficult for workers to withstand better performance.
Assessing the social context is the next plan for a negotiation.
Understanding the social constraints on negotiation, especially
social pressures, is essential in making negotiation more
complex when there are many parties in the negotiation.
Multiple parties can also help negotiators-collecting formation
from each party that is relevant and leading to final decision
making in improving the outcomes.
Presenting issues to the other party are the most critical step.
Through experience, the quality of an individual’s preparation
translates to the ultimate efficiency of the negotiation process.
A better understanding of the counterpart helps in improving the
quality of deals and reduces the amount of time in a negotiation.
An accurate understanding of the interest of other party helps in
achieving the negotiator's goals. Notably, unsatisfied interest on
any of the proposed deals by the other party can lead to
disagreement and ultimately hinders the outcomes in operation

(Gasink and Weiss, 2004). Negotiators should also have an
accurate walk away alternative of the other side to help in
developing an understanding that is more precise of the
different choices to satisfy their interests. Hence, it is important
to have prior preparation of a detailed and specific
understanding of the perspective of the other party to improve
the negotiation results.
References
Gasink, J. and Weiss, J. (2004). THE “OTHER” PARTY:
GETTING INTO THE MIND OF YOUR NEGOTIATING
COUNTERPART •. [online] Iveybusinessjournal.com. Available
at: https://iveybusinessjournal.com/publication/the-other-party-
getting-into-the-mind-of-your-negotiating-counterpart/
[Accessed 7 Jan. 2020].
Kesler, R. (2019). 3 Issues We Negotiate - Income School.
[online] Income School. Available at:
https://incomeschool.com/negotiated-issues/ [Accessed 7 Jan.
2020].
Ong, C. (2015). 5 Benefits of Strategic Planning | Envision.
[online] Envision. Available at:
https://envisio.com/blog/benefits-of-strategic-planning/
[Accessed 7 Jan. 2020].
Page, D., & Mukherjee, A. (2007). Promoting critical-thinking
skills by using negotiation exercises. Journal of education for
business, 82(5), 251-257.
Spangler, B. (2012). Best Alternative to a Negotiated
Agreement (BATNA). [online] Beyond Intractability. Available
at: https://www.beyondintractability.org/essay/batna [Accessed
7 Jan. 2020].
Staff, P. (2019). How to Set Negotiation Goals. [online] PON -
Program on Negotiation at Harvard Law School. Available at:
https://www.pon.harvard.edu/daily/business-
negotiations/managers-think-twice-before-setting-negotiation-
goals/ [Accessed 7 Jan. 2020].

Atlas Cold Storage Inc.
J. E. Boritz and L. A. Robinson
Centre for Accounting Ethics
School of Accountancy
University of Waterloo
Waterloo ON N2L 3G1
October 2004
2
Atlas Cold Storage Inc.
It had been a stressful summer for the executives and board of
Atlas Cold Storage; in fact it had
not been a summer at all. But Joseph Wiley as Chair of the
Audit Committee and representative
on the board of Atlas’s largest unit holder, TD Capital, felt the
pressure most acutely. Although

it was August 29th and summer was over, a new phase of the
Atlas saga was about to start now
that the press announcement was being proofed for the final
time. When investors returned from
their Labour Day weekend they would know what he had been
living with for months -- that
Atlas’s financial results would need to be significantly restated.
It had all started with the anonymous letter sent to the Ontario
Securities Commission (OSC) on
April 28, 2003. Had the letter not gone to the OSC perhaps the
situation could have been dealt
with internally without a need to announce to the public that the
financial statements were
wrong, very wrong. But with the letter they were forced to tell
the auditors, Ernst and Young
(E&Y) who insisted on coming in to review the books, again --
no doubt afraid that they might
get sued for issuing a clean audit opinion on financial
statements that were materially incorrect.
To make matters worse, the independent board members insisted
that E&Y should not do the
investigation, claiming the auditors were not independent
enough. Those board members
insisted on bringing in Kroll Lindquist Avey to oversee E&Y’s
investigation.
The news release read as follows:
TORONTO, Aug. 29 /CNW/ - (TSX: FZR.UN) - Atlas Cold
Storage Income Trust
announced today that it has received comprehensive reports,
prepared in connection with
an investigation of certain matters related to its financial
statements for its year ended

December 31, 2002. This review will result in a restatement of
its results for fiscal 2002
and 2001. The in-depth review was precipitated by the receipt
of a copy of an anonymous
letter that contained certain allegations with respect to the 2002
financial statements of
Atlas, its senior management, and certain accounting policies,
procedures and controls.
Following receipt of the anonymous letter, the board of
directors of
Atlas Cold Storage Holdings Inc., the Administrator of Atlas,
requested that its audit
committee undertake a comprehensive review and investigation
into the allegations
contained in the letter, and report back to the board of directors.
The audit committee retained Stikeman Elliott LLP as
independent counsel, who engaged
Ernst & Young LLP's ("E&Y") Global Investigations and
Dispute Advisory Group and
Kroll Lindquist Avey, The Risk Consulting Company ("Kroll")
to assist in the
investigation. E&Y carried out a detailed work plan to review
the allegations in the
anonymous letter and prepare a report for the audit committee.
No members of the E&Y
investigation team that prepared the E&Y report had any
previous involvement in
advising Atlas. Kroll was engaged to assist the audit committee
in supervising and
reviewing the E&Y engagement, to perform its own
investigative procedures to

3
supplement those performed by E&Y as it considered
appropriate and to report to the
audit committee thereon as well as with respect to its
assessment of the E&Y report.
The audit committee received the Kroll and E&Y reports earlier
today.
These reports concluded that expenditures of approximately
$3.6 million were
inappropriately recorded as additions to capital assets during
2002. In addition to
correcting for these items, the audit committee has determined
to make approximately
$1.2 million of adjustments with respect to items previously
identified during the course
of the 2002 audit but not made at that time by reason of the fact
that they were below
Atlas' audit materiality threshold.
As a result, the effects of the adjustments, after reflecting
appropriate income tax
adjustments, are as set out in the appendix to this press
release1. A description of the
restatement can also be found in note 16 to Atlas' quarterly
financial statements for the
six months ended June 30, 2003 which were released today and
which will be available at
www.atlascold.com or www.sedar.com .
After providing copies of these reports to, and consulting with
Atlas' auditors, E&Y,
Atlas has determined that:
(a) the financial statements for the year ended 2002 will be

restated to reflect the
conclusions described above;
(b) although the financial statements for the year ended 2001
were not the subject of this
investigation, as a result of the conclusions reached in respect
of the 2002 financial
statements and to ensure the propriety of Atlas' historical
financial results, Atlas
intends to restate its financial statements for the year ended
2001 by reclassifying
$1.6 million of capital assets as expenses as an estimate to
address potential
overcapitalization of expenses during that year; and
(c) as a result of the restatement by Atlas of its 2002 and 2001
financial statements, it will
be necessary for E&Y to reissue its audit opinion for these
years; accordingly, such
financial statements and the auditors' report therein as
originally issued should not be
relied upon by investors until such confirmation and
corresponding restated financial
statements have been provided by Atlas, which is expected to
occur once the audit
group of E&Y completes certain procedures on the restated
numbers provided to it
this week. These procedures are expected to be completed as
soon as practicable.
The reports concluded that the overstatement of net income by
management was
consistent with an intent to improve the financial results,
including distributable cash, of
Atlas. However, the reports concluded that other allegations
contained in the anonymous

letter were unfounded.
1 Not included in this case but can be viewed at the September
2, 2003 press release.
http://www.sedar.com/DisplayCompanyDocuments.do?lang=EN
&issuerNo=00004374
4
In the reports, each of Kroll and E&Y also made observations
regarding certain
weaknesses in Atlas' internal controls and procedures, in
particular as they relate to the
capitalization of project costs. The reports, which were received
today, are detailed and
the audit committee continues to review them and formulate
recommendations with
respect to dealing with the findings in the reports.
The audit committee and board of directors have been, and
intend to continue to be,
proactive and will take steps to implement the changes
necessary to address the issues
raised by the reports. These steps may include, but will not be
limited to, changes as are
found to be appropriate to internal controls, systems and
personnel. The restatement
arising from the reports will not have any impact on
distributable cash earned and
distributed for Atlas for 2003 other than the costs of the
investigation, which is expected
to total approximately $1.2 million. These costs are being
expensed as incurred.

Distributable cash is not a defined term under Canadian
generally accepted accounting
principles and accordingly, may not be comparable to similar
measures presented by
other issuers.
The audit committee implemented a policy whereby Atlas'
quarterly financial statements,
starting with its 2003 first quarter results, are, and will continue
to be, reviewed by its
auditors on a review engagement basis (including certain
substantive procedures with
respect to capital assets). Atlas does not contemplate any
adjustments with respect to the
unaudited financial statements for the three month period ended
March 31, 2003 or the
six month period ended June 30, 2003.
A copy of each of the Kroll and E&Y reports has been provided
to the Ontario Securities
Commission.
Joseph P. Wiley, Atlas board member and Chairman of the Atlas
audit committee, stated,
"As chair of the audit committee and appointee of TD Capital's
Canadian Private Equity
Partners Fund, Atlas' largest unit holder, I believe that the
investigations were carried out
rigorously and are complete. Our belief is that the restatement
captures all of the
adjustments necessary. We are focused on improving Atlas'
internal controls and
procedures to ensure they are representative of best practices
for the size of its operations.
The board of directors and the trustees of Atlas are fully
supportive of Mr. Gouveia, who

has taken a leadership role in resolving these issues."
Patrick A. Gouveia, President and Chief Executive Officer,
stated, "It is important to
Atlas that its financial statements be beyond reasonable
questioning. The process we have
just undergone support the actions the board of directors is
taking."2
2 Ibid
5
Background
Atlas Cold Storage is an Income Trust (“Atlas”) (formerly
Associated Freezers Income Trust)
established in February 1997 owned 100% of its operating arm
Atlas Cold Storage Holdings
(“Atlas Holdings”). The board of Directors of Atlas Holdings
administers the Income Trust. As
an income trust Atlas also has a Board of Trustees that provides
advice to the Board of Directors.
Atlas offers temperature-controlled warehousing and
distribution services to chilled-food
processors, distributors, and retailers. Atlas is North
America’s second largest cold storage
company with more than 50 warehouse facilities. The company
operates throughout Canada and
in the eastern, midwestern, and southeastern US. Atlas also
offers logistics services, such as

transportation management.
From 1997 through mid-2000 Associated Freezers Income Trust
grew steadily through
acquisitions and internal growth financed through a combination
of new unit issues and bank
loans. Patrick Gouveia founded Atlas in 1991 and operated a
similar but private business to
Associated Freezers. Effective August 11, 2000 Associated
Freezer Income Trust merged with
Atlas Cold Storage. The name after the merger was ACS
Freezers Income Trust (later changed
to Atlas Cold Storage Income Trust). As consideration for the
merger, Atlas shareholders
received the equivalent of 4.8 million units and two seats on the
board of directors. Atlas’s
operating subsidiary also entered into long term lease
agreements for certain warehouse facilities
owned by Gouveia.3 After the merger Atlas had an asset base of
$387 million and annual
EBITDA of $38 million. 4 On a pro forma basis total debt was
$142 million and total equity,
including convertible debentures, of $195 million. 5
Immediately prior to the merger there were
approximately 11.5 million Trust Units issued and outstanding6.
After the merger there were an
additional 9.6 million units outstanding with 4.8 million going
to each of Atlas and TD Capital.7
The merger was accounted for as a Business Combination.
Patrick Gouveia took over the role of
President and CEO of the combined entity.
Subsequent to the merger Atlas continued to grow. During the
two years between August 2001
and 2003, Atlas had entered into eight acquisitions at a cost of
$590 million, 8 the most significant

of which were the:
• July 2001 acquisition of two cold storage facilities in Calgary
and Vancouver for $31.3
million known as the Blue Star acquisition;
• March 2002 purchase of some of the assets of TCT logistics, a
trucking firm in
receivership for $5.2 million - TCT was renamed Atlas Supply
Chain Services Limited
(“Supply Chain”);
3 See: Material change report August 10, 2000
&issuerNo=00004374
4 Ibid
5 See: Material change report May 24, 2000
6 Management proxy / information circular Form 30 July 17,
2000
&issuerNo=00004374
7 Concurrently with the closing of the merger, TD Capital
Canadian Private Equity Partners received 4.8 million
units for its investment of $35 million and one seats on the
board of directors.
8 National Post September 3, 2003
6
• September 2002 purchase of some of the assets of CoolStor
Warehousing Services for
US$25 million; and

• October 2002 purchase of the majority of CS Integrated LLC’s
U.S. distribution network
for $218 million (US$137.5 million).
All of these acquisitions and the internal expansions were
expensive. To finance them, Atlas
entered into 5 successive equity issues in excess of $356 million
including:
• 4,250,000 unit issue announced in March 2001 at $8.70 per
unit
• 1,935,062 unit issue to Gouveia and TD Bank in March 2001
at $8.70 per unit
• 4,197,500 unit issue announced in July 2001 at $9.60 per unit
• 6,054,750 unit issue announced November 2001 at $10.45 per
unit
• 7,460,000 unit issue announced August 2002 at $11.40 per
unit
• 9,803,000 unit issue announced October 2002 at $11.55 per
unit
Atlas also entered into a credit facility with a syndicate of
Canadian and US banks in July 2001
for $191 million and a further facility in October 2002 topping
out at $306 million.
Income Trust
An income trust is a special purpose entity that sells equity to
the public in the form of units and
uses the proceeds to purchase an operating company that holds a
set of income-generating assets.
Legally, income trusts are a subset of the broader category of
‘mutual fund trusts’ within the
meaning of the Canadian Income tax Act. An income trust is
designed to maximize the cash
distributions paid to the unit holders by eliminating the

corporate income taxes paid by the
operating company. An income trust is a ‘flow-through’ vehicle
that allows income to flow
through it and be taxes in the hands of the investor only. 9
Income trusts may be an appropriate investment for individuals
and institutions whose focus is
on current cash flow rather than long-term growth. This is
because an income trust pays out up
to 90% of its net income plus non-cash expenses such as
depreciation and amortization. An
Income trust is an appropriate structure for mature companies in
non-cyclical industries that
require minimum capital expenditures to maintain the
productivity of assets.10 Due to their
structure income trusts’ growth prospects through the
investment in future growth is limited.
This is because profits that might otherwise have been invested
in future growth initiatives are
used up to achieve the short-term goal of cash distributions.11
Should an income trust become
focused on growth, the cash flow to finance the growth would
need to come from either reducing
distributions to current unit holders or new debt and/or
additional equity financing.
There are a number of issues that an investor should consider an
income trust. From a legal
perspective, as a consequence of being a unit holder rather than
a shareholder, investors do not
enjoy limited liability protection offered to those who invest in
incorporated companies. Unit
holders are potentially on the hook for liabilities related to debt
or company actions.12 The unit
9 Income Trust: Understanding the Issues by Michael R. King –

Bank of Canada Working Paper 2003 - 25
10 Ibid
11 Trusty Trust? By Andy Halloway, for Canadian Business
July 19 – August 15, 2004
12 Ibid
7
holder’s liability is being addressed in some provinces.13 One
of the benefits of trust ownership
is that distributions are made to unit holders in a pr-tax basis
thus eliminating the possibility of
double taxation that can happen under share ownership. Unit
holders treat the income as other
investment income so the tax rate would be the same as for
income such as interest.
The Fall Out
On June 2, 2004 the OSC filed a statement of allegations
against Patrick Gouviea, President,
Director, President and CEO and second largest unit holder of
Atlas at 8.1%, Andrew Peters
CMA, Executive vice-president and CEO, Ronald Perryman CA,
VP Finance and Paul Vickery
CA, Corporate controller and interim VP of Supply Chain.14
In addition, the Institute of
Chartered Accountants of Ontario began an investigation into
possible wrongdoing by
members.15
The Charges
The following allegations have been made by the OSC:

1. Inappropriate capitalizing of expenses from 2001 through the
second quarter of 2003 –
Atlas’s actual quarterly financial results were usually lower
than the unreasonably high
target presented by Gouveia to the market. Gouveia would
instruct accounting staff to
find more earnings. With his knowledge, accounting staff
reviewed all expenses over
$1,000 and reclassified invoices previously classified as
expenses as capital expenditures.
Many of these capitalizations were not in accordance with
GAAP.16
2. Timing errors – Atlas recorded expenses of $950,000 in 2002
which related to activities
of 2001;
3. Inappropriate recording of refunds – Atlas accounted for a
refund of $600,000 related to
the purchase of assets of TCT as a reduction of expense rather
than a reduction in the
purchase price of the assets; and
4. Failed to disclose a breach of covenants - As part of Atlas’s
lending agreement they were
not permitted to invest more that $10 million or lend more than
$500,000 to Supply
Chain. Although Supply chain only began operation is March
2002, the covenant was
breached by May 2002. Atlas did not disclose this fact to their
lenders and instead
covered it up through two means.
a. Supply Chain paid funds to Atlas at quarter end to bring them
back into

compliance. These funds were repaid to Supply Chain the next
day.
b. Atlas entered into a sale leaseback agreement at December
31, 2002, whereby
Supply Chain’s vehicles were sold to Atlas and leased back.
But, Supply Chain’s
vehicles were already secured under a general security
agreement and therefore
were not available for sale. This agreement allowed Atlas to
infuse cash into
13 The Ontario government has introduced legislation that
would limit the liability of Ontario Based unit holders
Under the Trust Beneficiaries’ Liability Act 2003. This act was
delayed due to the 2004 provincial election.
14 Statement of allegations
http://www.osc.gov.on.ca/Enforcement/Proceedings/2004/soa_2
0040602_gouveia.jsp
15 Globe and Mail February 18, 2004. Note: on September 20,
2004 Paul Farley of the ICAO would neither confirm
nor deny that in investigation was underway.
16 Statement of allegations para. 15
8
Supply Chain and thereby give the appearance of being in
compliance with the
debt covenants. In fact, there were no written sale leaseback
agreements, no
transfer documents for the vehicles and no lease payments were
made.

The OSC concluded that the purpose of these activities was to
improperly present an improved
picture of Atlas’s financial performance in order to enhance
earnings and conceal the extent of
losses at Supply Chain. As a result of the overstated earnings
Atlas overpaid the distributed cash
to the unit holders and the bonuses paid to management.
The People
Andrew Peters CMA was terminated as executive VP and CFO
on September 19, 2003. Ronald
Perryman CA, VP of Finance who was responsible for public
filings was terminated for cause on
November 13, 2003. Patrick Gouveia resigned on November 21,
2003. Effective January 30,
2004 the board of directors were replaced including:
• J. Nicholas Ross CA, Chairman of the board since inception in
1997
• Joseph P. Wiley who had been TD Capital’s representative
since the merger in 2000
• Jack H. Scott had been involved since inception and had acted
as interim President or
CEO during the late 1990s
• Jeffrey L. Rosenthal had been involved with Associated
Freezers since inception and had
been on the board since the merger in 2000
• Patrick Gouveia had joined the board with the merger between
Atlas and Associated
Freezers, resigned November 21, 2003
• Andrew Peters CMA had joined the had board with the merger
between Atlas and

Associated Freezers, terminated September 19, 2003
Two of the existing board member would continue until the next
annual meeting being Wes
Voorheis a new member and Robert Gillespie who is Chairman
and CEO of GE Canada and had
been on the board since 1998.
Ernst and Young who had audited Atlas since the inception of
Associate Freezers Income Trust
were replaced with Deloitte and Touche.
The Investors
Prior to the announcement on August 29, 2003 of the need to
restate the financial statements,
investors in Atlas could expect a steady increase in unit value.
At the time of the August 2000
merger the units were valued at $7.55. The market value
increased steadily to over $13 in
August 2003. Immediately following the announcement of the
restatement the units dropped to
$8.50. The decline has continued to below $5.00 in the autumn
of 2004.
The unit holders could also rely on a steady flow of cash each
quarter of approximately $0.24
per unit. These distributions were discontinued subsequent to
the second quarterly payment of
2003.
9

The Beneficiaries
Gouveia and Peters were well compensated for their
management of Atlas. In 2002 Gouveia
received salary and cash bonus of $1.359 million while Peters
received $885,000. They also
received 100,000 and 60,000 trust unit options, respectively, in
each of 2001 and 2002.
As a unique form of further executive compensation, Gouveia
and Peters received “restricted
phantom” units (“RPU”). These units entitled the recipient to
receive a cash payment equal to
the increase in market value of Atlas plus the cash distributions
paid over the intervening period.
Gouveia’s RPU totalled $602,000 by December 31, 2002 while
Peters’ totalled $361,000.
Because of the structure of Gouveia’s and Peters’ employment
agreements, their bonuses were
guaranteed. In 2003 prior to resigning, Gouveia earned salary
and cash bonus of $1.12 million
while Peters earned $603,000 prior to termination.
Required
1. What incentives were there for Atlas management to misstate
the financial statements? Is
there any significance to the fact that Atlas was an income
trust? Explain.
2. What “red flags” were present at Atlas? How should an
auditor assessing the risk factors
of this engagement have handled these red flags?
3. What is the basis for holding directors, management and

auditors accountable for
misstated financial statements?
4. Comment on the involvement of the auditors in the
investigation of the allegations
contained in the letter to the OSC. Why might it be appropriate
for them to be involved
and why would it not be?
5. The OSC detailed some specific accounting wrongdoings as
outlined above under the
heading The Charges. What audit procedures might have
detected these problems?

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