General Information Essay

2156 Words Nov 5th, 2012 9 Pages
ACC 476/726 – Auditing
Discussion Case Questions Fall 2004

General Information

The audit discussion cases are real-world examples of problems that auditors face in practice. Each individual case is brief, and every member of the class should read the case prior to class and come prepared to participate in class discussion.

Instead of the questions in the casebook, we will discuss specific issues related to the topic currently being discussed in class. The questions can usually be answered using your own opinions and the case information. The issues to be discussed for the cases follow.

Berkshire Hathaway – Tuesday, September 7, 2004

Background: The case captures the dynamics of auditor-client relations. The SEC has
…show more content…
How could she have handled the situation?
4. Do you think Vaughn should have handled the situation differently? Explain.
5. Do you believe the firm's response to the situation was appropriate? Explain. Are there other ways that the situation could have been successfully resolved?
6. Was it appropriate for the firm to promise Walker a good recommendation?

Oak Industries – Thursday, September 16, 2004 Tuesday, September 21, 2004

Background: Auditors have historically been more concerned with overstatements than understatements of earnings. However, recent SEC rulings suggest that auditors need to also be concerned about understatements of earnings, particularly when they are used to manipulate earnings in future periods. Actors: Oak Industries CEO, CFO, and controller (Group 4 – Trine Juliussen, Sang Uk Jung, Laura Platler)

1. Some people would argue that creating “rainy day” funds is just conservative accounting. Why should investors and the SEC care about understatements of earnings?
2. Why did Oak Industries intentionally understate earnings? What other factors might motivate firms to understate their earnings?
3. Auditors have generally been more concerned about overstatements of earnings than understatements. Auditors have also normally only been concerned when those overstatements exceeded certain materiality limits, such as 5% of net income. Has this responsibility increased to
Open Document