other services Auditors specific threats to their independence and objectivity 1. Dependence on income from a particular client or group of clients may impair objectivity and independence. Implications- auditor may not qualify the audit report when qualification is required because this will upset client who may move to another audit firm and thus cause loss of significant income. Safeguards Do not accept certain assignments. Resign from certain assignments. Do not stand for
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shareholders and allow the company to receive the highest possible price for its shares. The CFO has provided you, an accountant who works in Huaraz’s finance department a list of contentious accounting issues facing the company. Required: Prepare a report to the CFO that addresses the contentious accounting issues. Provide support for your recommendations. (You should provide brief solutions to each of these issues. In coming up with a solution you should recognize that not every problem has a definite
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secretary and such information and explanations as he desires for the purposes of audit 1. Auditors are given a broad power to detect fraud by the management. According to Newton v Birmingham Small Arms Co Ltd2, the court observed that obtaining all information that required for audit report cannot be prevented by a company’s Articles of Association. In this case, the directors should have powers to form an internal reserve fund, which was not to be disclosed in the balance sheet and which should be
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Shelley Stiles Week 2-HW P4-18 a. (1) The auditor must be without bias with respect to the client under audit. b. (3) involves the objective examination of and reporting on management- prepared statements. c. (1) maintain public confidence in the profession 4-19 a. (1) Contingent on approval of a bank loan b. (3) c. (3) 4-20 a. Violation of AICPA and SEC based on rules of independence, if pre-approved it is okay. b. Based on SOX and SEC rules internal auditing of a public company
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A View of an Accounting Fraud and Litigation from Inside the Courtroom What the Jury Heard in the PharMor Case 1 In the Phar‐Mor case, several members of top management confessed to, and were convicted of, financial statement fraud. Certain of Phar‐Mor’s creditors and investors subsequently brought suit against Phar‐Mor’s independent auditor, Coopers & Lybrand, alleging the firm was reckless in performing its audits. A jury found the audit firm liable for fraud. While this module can only contain a very small
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16-1. Identify the five basic types of financial statement audit reports and explain the circumstances under which report is appropriate. The five basic types are standard unqualified report, unqualified report with explanatory paragraph, qualified report, adverse report, disclaimer of opinion report. 1. Standard unqualified report a. No material violations of GAAP b. Disclosures are adequate c. The auditor was able to perform all of the necessary procedures d
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STERN & COMPANY, INC. 1. Observers of the accounting profession suggest that many courts attempt to Ў§socializeЎРinvestment losses by extending auditorsЎ¦ liability to third-party financial statement users. Discuss the benefits and costs of such a policy to public accounting firms, audit clients, and third-party financial statement users, such as investors and creditors. In your view, should the courts have the authority to socialize investment losses? If not, who should determine how investment
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K1.1-1 * Arthur Andersen: Enron was Andersen’s second largest client. Instead of being concern with the accuracy of Enron’s external audit, Andersen made the profits their priority. The firm offered consultation to Enron which amounted to a larger price tag than the actual external audit. So, not only did Andersen double check their own work, but Andersen threw their objectivity out the window for extra earnings. Andersen knew that it was not ethical to give audit and non-audit services because
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Third Parties Accountants have a responsibility to third parties who rely on the financial information prepared by the accountant. Third parties are not accountant’s client, but these third parties also rely on accountants’ financial statements, reports, disclosures, and
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discontinued in the first quarter of 2011 due to violations of the contract on Kraft Foods part of the deal (Starbucks Corporation, 2011). Although Kraft Foods was found to be in default of their part of the contract, Kraft Foods was asking in court documents for Starbucks to compensate Kraft Foods until an agreement was has been reached. Kraft Foods lost the pre-hearing for the compensation and the final agreement should come out soon and possibly in favor of Starbucks Corporation. Smart financial
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