Essay on ZZZZ Best Case: Questions

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

There were two external auditors mentioned in the case that dealt with ZZZZ Best. The first was not a firm that was included in the Big Eight accounting firms at the time. George Greenspan was the sole practitioner who performed the first full-scope independent audit for ZZZZ Best. Greenspan insisted that he had properly audited Minkow’s company, and testified that while planning the audit he had performed various analytical procedures to identify unusual relationships in ZZZZ Best’s financial data. Greenspan’s procedures reportedly included comparing ZZZZ Best’s key financial ratios with its industry norms. Greenspan identifies “unusual relationships” but does not go into detail in order to explain these unusual relationships. This shows that Greenspan did not show enough professional skepticism while conducting the audit and just blew off these unusual relationships. Also Greenspan testified that he had obtained and reviewed copies of all key documents that pertained to the false insurance restoration contracts. It would have been hard for Greenspan to uncover the fraud through the contract paperwork because Minkow and Morze went through such great detail in creating false documents in order to cover the false contracts, but finer details were overlooked by Greenspan. A journalist found one of these finer details which caused the domino effect leading to the destruction of ZZZZ Best. This shows that the first auditor,

Further information regarding the alleged improper construction work are set forth in written reports prepared by the Association’s retained consultant Encompass and Structure Tech Home Inspection Private Eye. Further information regarding the settlement are set forth in the mediated settlement agreement and release. For further information regarding remedial construction that is to begin in 2018 that information is set forth in RIC, Inc’s signed construction

Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

As indicated by PCAOB, the written representation cannot be a substitute for substantive procedures. Thus, auditors did not perform adequate procedures to test the management’s estimates. What’s more, inquires were heavily relied on the management’s integrity. Auditors ignored the professional skepticism. Finally, the 30 years and 15 years useful lives, which were adopted previously by Little Drummer, were not appropriately audited. Since the engagement team did not contact the predecessor auditors, the team did not get any audit documents from predecessor auditors regarding the assumptions of 30 years and 15 years. There was no evidence to show the reasonableness of these two assumptions.

Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements: the auditor shall evaluate, based on the audit evidence, whether the accounting estimates in the financial statements are either

And lastly the book discuses Goldman Sachs mortgage fraud. Goldman Sachs backed up $11 billion in mortgage loans even after knowing the loans were not a good idea. No one from Goldman Sachs informed regulators of speeding up the loaning process. The business had no consequences but one executive had to pay minor fines for misleading investors.

Baseline. "Does Honesty Pay Off?; Conventional wisdom says there's no financial return inmeeting the fraud-fighting requirements of the Sarbanes-Oxley Act." October 1, 2003.

1. There are numerous differences between performing a review and actual audit on the financial statements, but the major one is that the review does not contemplate obtaining an understanding of internal control structure. Also, a review does not assess control risk, tests of accounting records and responses to inquiries by obtaining corroborating evidence through inspection, observation or any other audit procedure. It can point out significant matters of the financial statements but does not provide assurance of their accuracy. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any misstatements on the financial statements. Ernst & Whinney never questioned the internal control, reviewed

Hamilton’s auditor employed multiple tendencies. Confirmation was used in the scheme to support management when they obtained a letter from the Company’s actuary that provided the “reasonable range” for pension assumptions that had been made in the past. Management also convinced MC to allow the meeting minutes between the two companies to

3-25 (a-c) The following questions concern audit reports other than unqualified audit reports with standard wording. Chose the best reponse.

It is possible for an auditor to come to an improper conclusion because documents, like invoices, could be easily falsified if management originally handles them or if the auditor receives them from management, like in the case of ZZZZ Best and Minkow. The auditor must always confirm payments directly with the third party.

And in the ZZZZ Best case the predecessor Greenspan was not contacted by the successor Ernst and Whitney, although Ernst and Whitney said they tried but wouldn’t disclose what they learned.

Ernst & Whinney audit firm suffered tremendously from the backlash of ZZZZ Best’s case. One of the issues stemming from ZZZZ Best’s case is the difference between a review and an audit as evidence by civil suit filed by a California bank against the firm. The bank claimed that its decision to grant ZZZZ Best’s loan was based on the opinion of Ernst & Whinney review of ZZZZ Best’s financial statements period ending July 31, 1986. The case was ruled in favor of Ernst & Whinney as the audit firm had expressly stated in their report that it was not issuing an opinion and the bank should not have rely heavily on the review report. Also, ZZZZ Best was a public company at the time, a review of its

A review is like an audit yet is less in extension and just gives restricted affirmation with respect to the financial statements. This varies with an audit that gives sensible affirmation that no material mistakes or illicit acts are detected. The goal of an audit is to give a sensible freedom of expressed opinion the money related proclamations taken all in all.