What could have been done to avoid the conflicts of interest

Reference no: EM132330631 , Length: word count : 2000

1) Discussion: (APA format, in-text citations, separate references, answer all questions please)

Oversimplifying the case of Enron and Arthur Andersen, Enron was using some accounting practices that were questionable. Because Arthur Andersen was an independent auditor, they were responsible for reporting any questionable accounting practices might be risky to the shareholders of Enron.

The Security and Exchange Commission was responsible for requiring and publishing accurate information about Enron's accounting information. In the end, a few Enron employees went to jail, and Arthur Andersen stopped doing business under that name.

Identify what you consider any conflicts of interest in the case of Enron and Arthur Andersen.

• What could have been done to avoid the conflicts of interest you identified?

• How would you change the laws to correct the problems that came up in the Enron and Arthur Andersen case?

• Explore how Enron and Arthur Andersen might have been encouraged to act ethically other than direct legal pressures.

2) Paper: APA format, in-text citations, separate references

Case Study: Conflicting Clients

Topic: Auditing (Confidentiality, Misrepresentation of Facts)

People Involved:

• Jennifer Grace, First year member of her CPA firm's management group

• Tom Ward, CFO of Fantastic Developments, Inc., a client

While reviewing the current-year audit working papers of Coshocton National Bank (CNB), the engagement manager, Jennifer Grace, noted something curious. In the working papers related to loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been randomly selected for confirmation but that Fantastic had not responded to either the initial or second confirmation request.

The audit staff disposed of this "loose end" by alternate procedures: examining cash collections (which had become somewhat sporadic) and vouching to underlying loan documentation, including a set of recent (unaudited) financial statements that showed Fantastic's solid financial position and operating profitability.

Jennifer noted this reference to Fantastic Developments because this private company was also a client of her firm. In fact, Jennifer had served as the audit senior on the prior-year audit of Fantastic. She knew that the company had been struggling for a couple of years and had experienced recurring operating losses. Her knowledge of Fantastic did not reconcile with the discussion in the audit working papers related to the financial statements furnished to the bank.

When Jennifer contacted Fantastic's CFO, Tom Ward, and inquired about the company's apparently miraculous turnaround, he was noncommittal and unhelpful. Tom replied that business had picked up. He apologized for not calling Jennifer's firm himself because he had been so busy, and then he told her that Fantastic had decided to engage another CPA firm for its accounting and auditing needs. Although confused, Jennifer obviously couldn't reject the possibility that this abrupt dismissal was a direct consequence of her inquiry.

As a result, Jennifer wonders whether the financial statements which Fantastic furnished to the bank as a basis for a loan application are fraudulent. The bank apparently has no such suspicion, however.

Use the Instructions for Case Analyses to craft a response to this case, articulating the main issues and ethical dilemma. Review the assessment criteria below before you begin writing.

Submit a written paper which is 2-3 pages in length exclusive of reference page and that is double-spaced. You should cite relevant resources in APA format.

Papers will be assessed using the following criteria:

3) Discussion: (APA format, separate references, in-text citations)

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Reference no: EM132330631

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