Chapter 1.1, Problem 1Q

From the Auditor's point of view, what is your recommendations and solution about Enron's Accounting Scandal?

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?

The CPA firm of Webster, Warren, & Webb LLP issued an adverse opinion on the internal control of Alexandria Financial, a public company, due to a material weakness. The weakness involved the lack of sufficient accounting expertise to evaluate and adopt appropriate accounting principles. Subsequent to issuance of the report, management of Alexandria hired a new controller to eliminate the weakness. a. Describe what steps Alexandria must perform to engage Webster, Warren, & Webb to issue a report indicating that the weakness no longer exists. b. Describe how Webster, Warren, & Webb should approach the engagement. c. Describe what Webster, Warren, & Webb must do if, during the course of the engagement, a member of the audit team discovers another material weakness in internal control over financial reporting. Will the new weakness affect the auditors’ report?

The Sarbanes–Oxley Acta. requires the SEC to establish a federaloversight board for the accounting industry.b. requires CEOs to certify periodic financialstatements.c. subjects auditors, accountants, andemployees to imprisonment for destroyingfinancial documents.d. prohibits many types of consulting servicesby accounting firms.e. All of the above are true.

Independence is compromised in which of the following situations? The auditor withdraws himself from the engagement team who will audit the business of his brother. The auditor is currently auditing a company where his brother is the Managing Director. The auditor obtained a loan from his friend’s bank. The bank is not a client of the auditor’s firm The auditor received payment for past due billings from the company who is no longer his client.

During the early 2000s, the role of accounting and the auditing profession in the United States changed due to the discovery of several impactful accounting scandals. Using the Strayer Library, research the economic climate surrounding two accounting scandals. What conditions caused accounting and the auditing profession's role to change during this time? What major changes occurred as a result of the accounting scandals?

The following scenarios may result in non-compliance with one or more of the principles in the code of ethics, by the auditor or accountants. John, a chartered accountant who is employed by a state-owned enterprise, appeared before a commission of enquiry into financial irregularities that occurred under his direction. John denied his involvement but there was proof made available which indicated he was lying. John acknowledged that he had lied and then went on to state that he was instructed to do so by his superiors. Discuss if the chartered accountants or registered auditors in each of the scenarios above, have failed to comply with any of the fundamental ethical principles in the code of conduct.

Jack Company hired Jill as the external auditor in 2002 and his auditor's opinion for 2002 to 2004 Financial Statements has been "Unqualified". When the typhoon hit in 2004, Jill was asked by the company for advice on how can they can maximize their earnings to ensure that they have enough funds to aid the additional expenses caused by the typhoon. In accordance with the Code of Corporate Governance, is there any violation made?

You are asked to be interviewed by a student newspaper regarding the nature of accounting fraud. The reporter says, “As I understand it, asset misappropriations are more likely to be found are more likely to be found in small organizations, but not in larger organizations. On the other hand, fraudulent financial reporting is more likely to be found in larger organizations.” How would you respond to the reporter’s observation?