The international CPA firm of Arthur Andersen faced significant liability in conjunction with its audits of Enron Corporation. From a legal liability perspective, describe the unique features of this audit case. Describe the important implications of this audit case for a firm of public accountants.

The international CPA firm of Arthur Andersen faced significant liability in conjunction with its audits of Enron Corporation. From a legal liability perspective, describe the unique features of this audit case. Describe the important implications of this audit case for a firm of public accountants.

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter5: Ethical Responsibilities Of Independent Auditors

Section5.3: Caesars Entertainment Corporation

Problem 2Q

See similar textbooks

Similar questions

During a recent discussion with the top management of GreenTree Company, a large publicly-traded entity, the external auditors, Wood's CPA firm has been apprised that the management of GreenTree may have knowingly allowed misstatements in the firm's most recent financial statements to be published. GreenTree's management are inquiring of the auditor as to management's potential liability in such a situation. The best response to this question by the external auditor would be which of the following?
If a public accounting firm says it always follows the rule that requires adherence to FASBpronouncements in order to give a standard unmodified auditors’ report, it is following aphilosophy characterized bya. The imperative principle.b. The utilitarian principle.c. Virtue ethics.d. Reliance on members’ collective conscience.
You are an Audit Manager for a CPA firm that is assigned to audit the ABC company. Near the middle of the audit, you are offered a job with the company you are auditing. As the Chief Financial Officer. What are the implications of this offer assuming ABC is a nonpublic corporation? What are the implications of this offer if ABC is a public company?
The American Competitiveness and Corporate Accountability Act of 2002 is otherwise known as the Sarbanes-Oxley Act. Provisions of this law significantly affected capital markets, corporate governance and the Accountancy Profession especially the area on auditing. true or false?
Audit committees have an essential role to play in ensuring the integrity and transparency of corporate reporting. The external auditor will normally report to the audit committee on all the following matters except: Select one: a.Detected frauds. b.Future staff requirements of the audit firm. c.Potential breach of Corporation Act 2001. d.The management responsibility in presenting annual financial reports.
Which of the following statements is true of the Sarbanes−Oxley Act? A. All private and foreign companies must issue an internal control report evaluated by an outside auditor. B. Accounting firms are allowed to provide both auditing services and a full range of consulting services to their public company clients. C. Those who commit securities fraud must be sentenced to 10 years in prison. D. The Public Company Accounting Oversight Board oversees the work of auditors of public companies.
Today, a very high percentage of publicly traded companies are audited by only four very large public accounting firms. These firms also do a high percentage of the consulting work that is done for publicly traded companies. How does this fact complicate the decision regarding whether CPAs should be allowed to invest in companies audited by their firm?
The following relates to the Menendez–Halliburton situation described in the text.(a) How would you characterize Halliburton’s accounting for revenue from ethical and professional perspectives?(b) Once KPMG learned that Menendez had provided a complaint to Halliburton’s audit committee highlighting questionable accounting and auditing practices, the KPMG audit partner instructed the audit team members to avoid communications with Menendez. How would you characterize those actions ethically and professionally?
Kroer & Sumner, CPAs performs a number of audits for its clients using GEnerally accepted Government Accounting Standards. As part of their GAGAS engagements, the firm often performs nonaudit services as defined by GAGAS. Which of the following is considered a nonaudit service under GAGAS and NOT a routine activity related to an audit? A) Providing advice to the audited entity on routine business matters B) Educating the audited entity on mantters within the technical expertise of the auditors C) Cash to accrual conversions D) Providing information to the audited entity that is reeadily available to the auditors, such as best practices ad benchmarking studies
Deloitte , a big audit firm was established in Oman in the early 1970s. As an external auditor , which of the following is not the right of Deloitte ( external auditor)? The right to prepare detailed reports on audit findings. The right to speak at shareholders’ meetings on matters affecting the audit or the auditor. The right to visit the branches of the client and right to access all accounting books and records. The right to all information and explanations (from management) necessary for the proper conduct of the audit.
The following factors describe a potential audit client. For each factor, indicate whether it is indicative of poor corporate governance. Explain the reasoning for your assessment. Finally, determine the risks to reliable financial reporting that are associated with each factor. a.The company is in the financial services sector and has a large number of consumer loans, including mortgages, outstanding. b.The CEO’s and CFO’s compensation is based on three components: (a) base salary, (b) bonus based on growth in assets and profits, and (c) significant stock options. c.The company has an internal auditor who reports directly to the CFO and makes an annual report to the audit committee.
J, B & J, Certified Public Accountants, has audited the Highcredit Corporation for the past five years. Recently, the Securities and Exchange Commission (SEC) has commenced an investigation of Highcredit for possible violations of Federal securities law. The SEC has subpoenaed all of J, B & J’s working papers pertinent to the audit of Highcredit. Highcredit insists that J, B & J not turn over the documents to the SEC. What action should J, B & J take? Why?