Reference no: EM13887206
In 2005, Deloitte & Touche agreed to pay a $50 million settlement concerning its failed audit of Adelphia Communications. The settlement was the largest ever to that date, with a record penalty of $25 million.
Individual auditors found to be unqualified, unethical, or in willful violation of any provision of the federal securities laws can be disciplined by the SEC. Actions taken by the SEC in these types of situations are described in Accounting and Auditing Enforcement Releases (AAER), Litigation Releases, and Administrative Proceed- ings available at www.sec.gov.
a. Read AAER 2326 (September 30, 2005; Administrative Pro- ceeding File No. 3-12065) and AAER No. 2842 (June 25, 2008; Administrative Proceeding File No. 3-12065), available at www.sec.gov. These releases relate to the actions of William E. Caswell, CPA, who served as a director and held the most senior, nonpartner position on the Adelphia engagement. What type of improper professional conduct was William E. Caswell, CPA, engaged in? In 2005, what was the SEC's response to this behavior? What was the SEC's response in 2008?
b. Consider Caswell's failure to make sure that Adelphia's disclosure of its liabilities related to the co-borrowing credit facilities was sufficient. Use the framework for ethical decision making to assess Caswell's actions related to this disclosure.
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