The Willie & Lomax Engagement Essay

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

5. Which Fed tool do you think is most important, and why? (2-4 sentences. 1.0 points)

Wise-Holland Corporation, an S corporation, is split evenly between Marianne and Dory, two women with limited business knowledge. Wise Holland’s previous accountant of ten years was fired after Marianne received a notice of deficiency on her 2012 tax return due to $20,000 of disallowed flow through loss from Lucky Partnership, a small partnership deemed to have no profit motive; interest and a 20% penalty for substantial underpayment was also required, all of which Marianne paid immediately. She also signed a waiver extending her 2012 individual return statute of limitations three more years.

Although this practice was not fraudulent, the plaintiffs insisted that Campbell had a responsibility to record a reserve or allowance in anticipation of substantial customer returns likely to result from theses “sales.” Despite the fact that a large percentage of product sold under guaranteed sales contracts was returned, the company’s accounting staff apparently never recorded appropriate reserves for those sales returns. The plaintiffs charged that PwC must have known about Campbell’s bogus sales, but

The Goodner Brothers, Inc. audit case is based off the story of two men who have been friends since their childhood: Woody Robinson and Al Hunt. Now as adults, Mr. Hunt works for an auto supply store while Mr. Robinson works for Goodner Brothers, Inc., a tire wholesaler in Huntington, West Virginia. In the Goodner case, internal auditors were conducting their annual inventory counts of Goodner Brothers, Inc. and determined that their numbers were lower than the book inventory numbers by $143,000. As it would with any company, the misstatement of inventory raised red flags forcing the company to contact their independent audit firm to investigate the inventory shortage. The

2. Evaluate Andersen’s claim that their problems on the Enron audit were due to a few “bad partners” in the organization. If you disagree with this claim, discuss what you think were the root causes of the problem. I do not believe Andersen’s claim. I believe that they had full knowledge of what was happening at Enron. I believe that Enron was paying off the auditors (staffers) in the Houston office. I believe they were

A month previously Ramos received a phone call to a company hotline from fired employee, Betty Koster, who had been working in the accounting department for the past 8 years and believed that her termination was based on age discrimination. As Ramos already knew from her experience, calls from employees usually lead to investigation and should be handled immediately in order to avoid any possible lawsuit. After investigation of Koster’s employment file and interview with her supervisor, Simon Peel, Ramos understood that she needed evidence from Koster about age discrimination, since having been the oldest in department and the only person fired does not prove the allegation. When Ramos conducted a second call to the employee, Koster was very emotional and revealed new information about possible noncompliance with accounting procedures. Based upon her statement, sales representative Mark Tomkin, was alleged to have asked the accounting team to process entries without required approvals and or all required documents. Koster was the only one who did not agree to post anything into the accounting system without supporting documents. This was the reason why she believed that she had been fired.

Place yourself in Hamilton Wong’s position. Would you report all of your time worked on the Wille & Lomax audit? Why or why not? Do you believe that Lauren Hutchinson behaved unethically by underreporting the time she worked on that engagement? Defend your answer.

Ashley Johnson is the sole owner of Johnson Real Estate, hereby referred to as “JRE”, which is a sole proprietorship (LLC) that lists and sells real estate in West Virginia. Ashley’s husband James is the president of JRE and is the day to day operator. Besides James, there are two employees: office manager Joan Rogers and receptionist Doris Chambers. The realtors are contracted sub-agents that personally collect commission checks at the end of each month. These realtors receive 65% of the commission granted to the broker, the rest is deposited into JRE’s checking account. Ashley noticed discrepancies in the commission receipts from closings and the actual bank deposits in the year of 20X9. The previous year there were no problems. JRE has not been audited for the past three years due to rapid growth. Ashley filed a report with the local prosecutor, a family friend, and requested a thorough investigation, which resulted in the prosecutor’s office contracting an accounting firm to complete the financial examination. The prosecutor’s office assigned special agents Thomas and Longworth to the case. The prosecutors are Gina Conrad and Barry Morton.

Imagine trusting your hard-earned money like your retirement savings to a financial adviser or Certified Public Accountants (CPA) only to lose it all in a fraudulent Ponzi scheme. In today’s world of business many organizations, financial planners and accountants are in the news due to the financial ethical breaches that have affected their customers, employees, and the general public. A CPA has to be responsible for their audits and take any punishments as a result of their mistakes, incompetence or illegal actions. CPAs are expected to have integrity in their work,

1. Discuss three management events that occurred that should have been a “red flag” to the auditing firm.

On the Maxwell & Co. side of the Craftset assignment, there was more than one accountant assigned to the client, and there was a Senior accountant who provided supervision. Therefore, there was some segregation of duties and a senior member of the firm to verify that all work is being done correctly. With no room to wiggle, she did just enough to be able to keep focus on Rusher.

The common problem with informal leadership positions is that they are often characterized by a high-level of responsibility for results with little to no authority over the people doing the work (Lewis, 2011, p. 112). For DCAA senior auditors, the role of lead auditor matches this scenario perfectly. The lead auditors in a DCAA audit engagement teams lacks the authority and influence on how audits are conducted because of its organizational structure. DCAA field audit offices (FAOs) are organized as a “weak matrix organizational structure”.

Finally, we need to know if E&Y acted ethically throughout this engagement. E&Y had a close relationship with Rouse Co., one of MGR’s landlords. E&Y was soliciting business from Rouse and provided significant tax services. Also, Swidler and E&Y had participated in at least 12 different business arrangements, some of which resulted in Swidler receiving significant fees from E&Y.

1. After discovering the suspicious items in JWP’s accounting records, should he have taken a different course of action than he did?