Ethics and Professional Responsibility

2705 Words11 Pages
Like most business professions, there has to be a strong sense of ethics and responsibility. Especially professions like law or public accounting. They must have strong standards of integrity. In public accounting, people rely heavily on the information being provided on companies. Any mistakes or intentional cover up will have high costs to the economy and dire consequences. Even though there are laws and standards that regulate auditing, it does not completely stop or prevent firms from doing immoral acts. Before Sarbanes-Oxley Act of 2002, auditing for both public and privately held companies followed the AICPA 's standards of the 10 generally accepted auditing standards. In the years 2000-2002, there had been an increased of major…show more content…
There was a conflict of interest between the FOF and KRC. Should they have told FOF about the heavy overcharges of the properties being sold from KRF to FOF for the interest of FOF, or kept silent of the matter for the interest of KRC? Andersen had chose the latter choice and got caught in a unfavorable situation. From the very beginning when Andersen found out about FOF and KRC advisory relationship, they should have immediately not accepted to engage with KRC. Auditing for opposing sides can cause serious problems for the firm. The auditing firm will be the first one to be liable for their actions. Either choice would have resulted in a lawsuit with the client. Both cases of Enron and the Fund of Funds addresses a serious issue with independence. In the AICPA 's generally accepted auditing standards, “The auditors must maintain independence in mental attitude in all matters regarding the audit.” Because Andersen had conducted so much non-auditing services that impaired independence, the Government Accountability Office imposed more restrictive standards on auditor independence. Public accounting firms cannot allow personnel that does the auditing to also work on nonattest engagements for the same client. Also the accounting firms themselves can not perform nonattest services that are significant or material to the subject of the audit. Section 203 of Sarbanes-Oxley further addresses issues of Andersen 's independence. In section 203, it states that it is illegal
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