Phar Mor

Satisfactory Essays
ACCT 4304, Fall 2015
Audit case

Read the attached audit case and answer all the questions that follow. A total of 90 points are available for the actual responses to the questions and 10 points are available for presentation, clarity and grammar. Total points for the assignment are 100.
Note: Answer the questions as comprehensively as possible. Reference to Auditing Standards, your textbook, and other relevant authoritative sources is expected where appropriate. Even where some of the questions are quite general, try as much as possible to relate your answer to the case.

1. Some of the members of Phar-Mor's financial management team were former auditors for Coopers & Lybrand.
(a) Why would a company want to hire a member of
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(a) In light of this, discuss the importance of audit documentation. (3pts)
(b) Identify and briefly explain two other instances in the Phar-Mor Case where better audit documentation could have helped Coopers in their defense. (4pts)
8. Read the plaintiffs courtroom strategy. Explain why you think the plaintiff chose to make the argument that they did. (4pts)

9. How much blame, if any, would you place on the investors for having made those huge investments into Phar-Mor? Explain (3pts)

10. The defense (auditors’) strategy was to argue that they were essentially victims of a fraud perpetrated by Phar-Mor management. In your opinion, how valid is this view and should the jury have considered this in their verdict? (3pts)

11. Suppose that Phar-Mor had attempted to sue Coopers for negligence. Do you believe that they would have been successful or not? Explain (3pts)

12. Of the 38 investors and creditors who filed suit against Coopers, only 8 took their cases to trial with the remainder settling out of court. Do you consider the out of court settlements to be an admission of guilt on the part of Coopers? Explain (3pts)

13. Do you agree with the Jury’s verdict? Why or why not?
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