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Acct Ethics

In: Business and Management

Submitted By calh2603
Words 488
Pages 2
1.) Although one of the main purposes of an auditor is to keep a client’s financial statements fairly stated, I do not believe that it is solely the auditors’ responsibility to discover fraud. The auditors in this case varied distinctively in performing their required duties. The fact that the original auditors, Friehling & Horowitz, failed to even view ZZZZ Best perform any revenue generating activities shows a serious lack of responsibility and professionalism by the auditors. The larger CPA firm, Ernst & Whinney, did in fact perform a slightly better audit, but in turn was fooled by Minkow’s deceitful manipulation. In this case I believe that the auditors do hold a certain level of responsibility to the stakeholders who relied upon their professional judgment in making decisions.
2.) A. It is important to exhibit a higher level of sensitivity of moral judgment when performing an audit simply due to the fact that a good auditor should pick up on management acting out of the norm. This may be exhibited through high irritability, nervousness or even an attitude picked up by the auditor. Ernst & Whinney did not perform sensitive moral judgment in many different regards. Minkow constantly pressured the CPA firm to back off when they became too curious in his eyes. He would even make threats to take his business elsewhere. These two tall tell signs of prevalent fraud lead me to conclude that Ernst & Whinney lacked any moral judgment what so ever.
B. Auditors must be both independent in fact and appearance. The CPA firm Ernst & Whinney was independent in fact; however, the constant pressure to keep their new large client may have ultimately impaired their independence. They turned a blind eye to many events that should have red flagged any auditor truly devoted to protecting other stakeholders.
C. By definition the concept of due care is the quality of work performed by the CPA. The purpose of the due care standard is simply another way to promote ethical judgment not just as a defined set of rules, but as a state of mind or attitude exhibited by a CPA. Ernst & Whinney did not fulfill its obligations to practice with due car in mind. This is due to a deeply rooted underlying want for the business. E & W instilled this responsibility upon all of its CPAs, which resulted in a deviation from the ethical acts that should be exhibited by an auditor.
The accounts that stand out to me and which define the company’s ability to perform over the short run are the current liabilities and assets. The company lacks serious amounts of available capital to payback its short-term obligations. This would lead me to conclude that management has been irresponsible with its borrowing and collecting of Accounts Receivable. The current liabilities (and current Notes Payable) far out weigh the company’s available resources. The auditor should have traced where all of their revenues and loans have been going

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