Cardillo Case

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

The audit profession is a relative new comer to the accounting world. The Industrial Revolution, with the growing business sector, was the spark that resulted in auditing techniques being sought out and utilized. Initially, audit techniques and methods were adopted by companies to control costs and detect fraud, which is more closely aligned with internal auditing. However, the need for mandatory oversight of public companies was recognized after the great stock market crash of 1929 (Byrnes, et al., 2012). This brought about the Securities and Exchange Act of 1934 creating the Securities and Exchange Commission (SEC). At that point, the SEC was tasked with

- The client may have had an issue with the predecessor auditor and this could be the reason for the switch. The client may not want the successor auditor knowing of the past audits for several reasons. An unqualified opinion may have been accessed by the successor that the client did not agree with. The client may not want this to happen so they switched auditors to try and gain a qualified opinion. Also, the client may want to start fresh with a new firm and receive a completely new opinion to ensure that their financial statements are still assuredly presented in a qualified manner.

With regards to the FTC's 5.2 millions of air charter revenues from IAS, I didn't find Rubin's explanations convincing for lack of documentation for those transactions. Due to the highly materiality and nature of this transaction, I suggest us to further pursue those revenues for the proper documentation. I retain my opinion on this issue until the further evidence. Should we discuss this matter or bring it to the higher level, let me know.

This post will discuss two ethical accounting dilemmas that could occur in the CPA profession. For each dilemma, it will explain how the dilemma could be resolved based on logic and reason. It will then support that proposed resolution through support from the American Institute of Certified Professional Accountants (AICPA) Code of Professional Conduct.

The purpose of this paper is to discuss the SEC’s influence on auditing a private company and the essential activities involved in the initial planning of an audit. Next the discussion will delve into four stages of the audit and tasks performed by the auditors as well as internal control findings and various aspects of the audit.

Accountants are held to a higher ethical standards and they must performed their duties in compliance with standards or ethical values of honesty, integrity, objectivity, due care, confidentiality, which must be fully committed to. They must put clients or public interest first before their own. They must have and ethical values and maintain those values way beyond what the society or the company’s code of ethic. It is important that accountants’ behavior or ethical values is in conformity with the

Prior to Sarbanes Oxley act, auditing firms were self regulatory. It may happen several times that challenging the counts of the companies damage the relationship with the clients. The frauds of the companies cannot be detected easily. There are many risks associated with the auditing report since it will not be able to report the actual position of the companies. The Sarbanes Oxley act states that it shall be unlawful to contravenes the provisions of the commission because it is not in the public interest or it is unprotected for investors, for any other person to take any action to fraudulently influence, manipulate, coerce and mislead any independent person in the performance of preparing the audit report of the financial statements of any concern.

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 successor auditor is the auditor who is considering accepting or has already accepted engagement with the new firm. Communication between the predecessor and the successor is important. This information can bring about many issues such as “the predecessor auditor and the client may have disagreed about accounting principles, auditing procedures, or similarly significant matters” (PCAOBUS.org, 2013). The successor auditor should initiate the communication with the predecessor. The reason behind the successor auditor initiating the communication is to obtain valuable information that can lead to whether or not they should accept the engagement. The successor auditor may only request reasonable information to the predecessor auditor pertaining integrity of management, disagreements in accounting principles, auditing procedures, and or other significant matters. In addition, successor auditor can establish communication with audit committees or other with equivalent authority regarding “fraud, illegal acts by clients, and internal control related matters” (PCAOBUS.org, 2013). There are laws of confidentiality that the predecessor must abide by. The predecessor must maintain confidentiality at all times. Due to this confidentiality laws

The second step under Trevino and Nelson is to define the ethical issues. In this case, the American manager felt that it was dishonest to underreport earnings on the tax form. The manager also identified the payment of bustarella, which was viewed almost as a corrupt practice. These issues were ethical to the American manager, who assumed that because the process was different and less transparent than the American tax system that it lacked ethical integrity. To the Italians, however, neither practice is considered to be unethical, and should not have been an ethical dilemma for the manager. The manager was caught feeling that there was an ethical dilemma because such practices conflicted with his

This study aims to understand what effect has an ethical framework in accounting. In particular, we examine the influence of ethics on earnings management, financial reporting, and external accounting. Today, the commercial environment reveals the unethical behavior of management and accountants through the manipulation of accounting records to boost the company’s stock price, falsified financial statements to mislead investors, failure of auditors to correct errors and omissions due to client’s pressure and personal material interests.

The auditing firm has been in engagement with the company throughout the period when the fraud was being committed. One of the common and clear indicators of possible fraud was the company’s cash flow statement. The company experienced positive growth in its profits from the year 1996 through to the year 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative figures of cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flows from operating and investing. It is therefore evident

The ethical dilemma Bob faces in this case is a transaction that makes Bob question his and the company’s ethics and legal obligations. It’s February, business was slow, the company was $5,000 below their breakeven point, and it appeared as if a

Ethical issues have greatly transformed in our lives since the great Enron, Xerox and other huge corporations proposed big profits showing earnings of billions of dollars and yet in reality facing bankruptcy. These corporations faced great trouble with the federals and state for manipulating financial statements. But not only corporations can be blamed on this, accounting firms were involved in this as much as the corporations were. With the business stand point, ethics comprises of principles and standards that guide behavior. Investors, traders, customers, and legal system determine whether a specific action is ethical or unethical. Ethical issue is a vast subject, but we will look at the niche