Ann Marie Case Auditing

An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002

With different industry definitions and viewpoints, fraud can be a tough issue for audit committee members to grasp for oversight purposes. The legal obligations of audit committee members have intensified because their standard duty of care and loyalty to the entity has increased in light of management fraud activities.

3) Do you agree with what was done in the case regarding the problem? Why or why not?

A ) The objective of an audit is to safeguard agreeability with the customer's work benchmarks, assess execution and amplify benefits. Clearly, regardless of how skilful the auditor is, auditing every record is a physical outland possibility. Regardless of the possibility that 100 percent of the data could be tried, the expense of testing would likely surpass the normal advantages (the confirmation that goes with analysing 100 percent of the aggregate to be inferred. What is needed is an examining of the records. There are various techniques used by auditor for decision making during auditing. Auditors will not test all the information available to them because they are uneconomical

John Ross, who had been a manager with a large CPA firm, was quickly hired to replace Wagner. Although the change in Datasave 's chief financial officer caused some disruption, the audit was completed on a timely basis.   As the last step in the audit process, you have prepared the representation letter for signing. You wanted the letter to be signed by William Cox, the president; Robert Star, the controller; and Wagner, who occasionally came to the company 's offices to resolve matters regarding his past compensation. The signatures of Cox and Star were obtained, and you approached Wagner for his signature. In response to your request, Wagner replied, “I no longer am employed with this crazy company. Why should I take any responsibility for the financial statements?” Despite your attempts to persuade him, Wagner refused to sign the letter. Wagner also refused to discuss the reasons for his resignation, other than to say the reasons were personal.   When you discussed the problem of Wagner 's refusal to sign with Cox, he indicated that there was no problem because Ross would sign the letter. You see this as a possible solution, but you are aware that Ross knows very little about the financial statements for the year under audit. Also, you are still somewhat concerned about the reasons for Wagner 's resignation.Required: a. Describe fully the alternatives that are available to you in this situation.Making

This case established that an auditor could be sued by a primary beneficiary for damages from negligence. A primary beneficiary is a party that has a direct benefit from the audit. Non-privity parties could also sue for gross negligence. This increased the auditor’s legal exposure to third parties. The SEC of 1934 reflected these changes and many others; one significant change was that auditor’s had a much higher litigation risk due to their new responsibility to third parties.

The audit work has been performed according to the original or a modified audit plan;

Accountants owe the duty to act in a professional and ethical manner concerning clients, as well an obligation to respect the laws that are involved with the profession. This is where a crossroads of ethics and legalities are formed and potentially the defining point of crucial decision-making. Stephen Richards and his actions under employment with Computer Associates (CA) are then examined in light of this concept.

Also Robinson is not a person of integrity. In his audit he violated SAS No.1 as well as AU sec110, AU Sec. 220 and AU Sec 230. AU 110 states that the objective of the audit of financial statements by the independent auditor is the expression of an opinion on the fairness with which they present, in all material respects, financial position, results of operations, and its cash flows in conformity with generally accepted accounting principles. Roberson did accept “precise point estimates” that results in material misstatements of company financial reporting. Moreover, the AU section 220 states that the auditor must maintain independence in all matters relating to the audit. Robinson and Crabtree were close friends. In addition Robinson violated Due Professional Care, AU section 230. He forgot that the professional skepticism exist by allowing “precise point estimates” of accruals which provides a base for manipulation of financial statements. Moreover, the ET Section 102-2 states that a conflict of interest may occur if a member performs a professional service for a client or employer and the member has a relationship with another person, entity, or service that could impair the member’s objectivity. Thus, David’s integrity and independence can be questioned because he is trying to please Hansen to make partner.

A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered a “sniff” of an audit, which comparatively provides reasonable assurance that no material misstatements occurred. Since a review deals with a limited scope, it does not provide the basis for expressing an opinion on the presentation of the

The purpose of the report is to provide feedback to management and internal audit on the actions that have been implemented by Nedgroup Insurance Company “Nedgroup” to resolve the audit findings, which were reported by Sasria internal audit during November 2015.

Accountants and auditors are often faced with having to make decisions that bring ethics into question. The American Institute of Certified Public Accountants (AICPA) sets the standards for professional conduct that dictates what accountants are allowed to do and what they are not allowed to do. However, issues do arise that have not been addressed by the AICPA and when this occurs it is up to management to use their best judgment to make a determination about the ethical implications of their actions (Allen, 2011).

This case study will analyse the ethical dilemmas faced by David, audit manager at C & A who is hired to do the financial year-end audit for MAL. The six step ethical framework will be adopted to gain an understanding of principles and obligations for analysing the situation faced by David and arrive to a professional and responsible resolution.

Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to perform lax audits in order to secure more consulting business from the clients. There were other provisions in SOX that increased the regulatory burden on the auditing profession in response to lax auditing practices in scandals like Adelphia (McConnell & Banks, 2003). This paper will address the Adelphia scandal as it relates to the auditors, and the deontological ethics of the situation.

WorldCom acquired Arthur Andersen as the independent external auditing for the company. As WorldCom grew after the merger with MCI, Andersen began to invoice less than they should have. The charges were defended as an opportunity to prolong business with WorldCom. (Kaplan and Kiron, 2007). This is an immediate red flag for a company. Where were the ethical practices of the independent auditor? If the auditor has no ethics, how can one possibly be assured that the company is performing its intended function appropriately? The board of directors should have immediately been informed of Andersen’s practices and made a decision to confront Andersen’s practices and possibly obtain new independent auditors.