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: Arthur Andersen

Question # 00083644
Subject: Accounting
Topic: Accounting
Due on: 08/21/2015
Posted On: 07/22/2015 12:53 AM

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BACHELOR OF ACCOUNTING (HONS)

COURSEWORK

Year

2012

MONTH

DECEMBER 2012

Subject

FIN4054 - AUDITING AND ASSURANCE SERVICES 1

Weightage

40%

Submission Date

WEEK 8

Regulations

A. Late Submission

· A 10% deduction per day of total coursework marks (excluding weekends and public holidays).

· Late submission between 5 to 10 days, results in a 50% deduction of total coursework marks.

· Late submission past 10 days results in an automatic 0% for coursework and the student will be barred from the final examination.

B. Deliverables

Students must submit all materials supporting their coursework listed in the deliverable section.

  • The coursework must be done individually and must be entirely your own work. Please make sure that you are aware of the rules concerning plagiarism. If you are unclear about them, please consult your program coordinator/lecturer.

.gif" alt="Text box: plagiarism is presenting somebody else’s work as your own. it includes: copying information directly from the web or books without referencing the material; submitting joint coursework as an individual effort; copying another student’s coursework; stealing coursework from another student and submitting it as your own. suspected plagiarism will be investigated and if found to have occurred will be dealt with according to the procedures set down by the university/college.">


  • The coursework should exhibit formal research skills i.e. with a table of content, proper citations, references, and appendices.
  • The coursework write up must be able to demonstrate critical analysis and application of both theory and practical issues to the company that you have selected.
  • Student may include additional relevant data/information apart from the proposed guidelines in conjunction to your research. Additional marks will be awarded for such attempt.
  • A CD containing the softcopy version of your coursework should be submitted as well (if required).

BACHELOR OF ACCOUNTING (HONS)

COURSEWORK – QUESTION

Large number of corporate collapses gave rise to a worldwide scrutiny of the accounting profession and the implosion of Arthur Andersen, a global accounting firm and one of the then Big Five accounting firms.

In May 2001, Sunbeam’s alleged accounting fraud resulted in Arthur Andersen making a settlement for a shareholder suit of $110 million. A month later, Arthur Andersen agreed to pay a $7 million fine after SEC charged it with issuing false and misleading reports bolstering Waste Management by more than $1 billion between 1992 and 1996. Arthur Andersen had also paid part of a $229 million settlement to shareholders of Waste Management. The year 2001 ended with the massive impact of Enron’s bankruptcy in December.

The SEC began its investigation in late October, examining its accounting practices and the performance of Enron’s auditor, Arthur Andersen. The accounting practices being questioned included complex debt hiding schemes using special-purpose entities, manipulation of the Texas power and energy markets, and bribes; its auditor, Arthur Andersen was alleged to have breached its independence by being involved as internal auditor for the company, and by allowing ex-audit partners to take part in its governance. Arthur Andersen was later indicted for its alleged obstruction of justice by destroying Enron documents. The firm was found guilty of a criminal offence in June 2002.

In Enron’s case which involved manipulation of accounting books and the use of accounting services provided by Arthur Andersen as the accountant and management consultant. The company was alleged to have inflated revenues and cash flow figures to boost share prices and to satisfy analysts.

WorldCom was reported to have overstated its cash flow by booking $3.8 billion in operating expenses as capital expenses and provided its founder with a $400 million off-balance sheet loan. The company further stunned Wall Street by announcing it found another $3.3 billion in improperly booked funds, and taking a goodwill charge of $50 billion. The former chief financial officer (CFO) and ex-controller were arrested and charged with criminal activities. WorldCom’s auditor was Arthur Andersen.

Leung, P, Coram, P, Cooper, BJ & Richardson, P ‘Modern Auditing & Assurance Services’ 4th edition, John Wiley & Sons Australia Ltd

Required:

Your task is to read the following book;

Toffler, BL & Reingold, J ‘Final Accounting Ambition, Greed and the fall of Arthur Andersen’Currency Doubleday, New York

In addition to the required reading above, you are also required to answer the following questions:

i) Every profession is concerned about the quality of services, and the public accounting profession is no exception. Quality audits are essential to ensure that the profession meets it responsibilities to clients, to the general public and to regulators who rely on independent auditors to maintain the credibility of financial information. To help assure quality audits, the profession and the regulators have developed a multilevel regulatory framework. For the purpose of describing the framework, these activities may be organized as follows:

· Standard setting

· Firm regulation

· Self or peer regulation

· Government regulation

Analyse whether Arthur Andersen had practiced the regulatory framework for ensuring quality services before its doom.

(25 marks)

ii) The word ‘ethics’ is derived from the Greek word ethos, meaning ‘character’. Whereas morality focuses on the ‘good’ and ‘bad’ human behaviour, ethics focuses on what is ‘right’ and ‘wrong’, and how and why people act in a certain manner. It focuses on a study of choices, standards and behaviour.

IFAC’s mission is the worldwide development and enhancement of an accountancy profession with harmonized standards able to provide services of consistently high quality in the public interest. The IFAC Code establishes ethical requirements for professional accountants. A member body or firm may not apply less stringent standards than those stated in the IFAC Code.

The following are the threats to compliance with the Code of Ethics (IFAC Code) by professional accountants in public practice:

i) Self-interest threat

ii) Self-review threat

iii) Advocacy threat

iv) Familiarity threat

v) Intimidation threat

vi) Public practice behaviour

Analyse whether Arthur Andersen had encountered any of the threats above and explain how it was dealt with before its doom.

(25 marks)

iii) In the provision of auditing services, an auditor is liable to compensate a plaintiff if :

· A duty of care is owed to the plaintiff

· The audit is negligently performed or the opinion is negligently given

· The plaintiff suffered a loss as a result of the auditor’s negligence

· The loss is quantifiable

Negligence has been defined as any conduct that is careless or unintentional in nature and entails a breach of any contractual duty. If the auditor has been negligent, then the client may sue the auditor for breach of an implicit term of the contract to exercise reasonable care and skill, so as to recover any consequential loss suffered.

In your opinion, was Arthur Andersen negligent during the provision in its auditing services to its many clients? Please describe the events that demonstrate their negligence.

(10 marks)

iv) Client evaluation is an important element of quality control. (ISA 220.14) states:

The engagement partner shall be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and specific audit engagements have been followed, and the conclusions reached in this regard are appropriate and have been documented.

The following steps are good practice in accepting an audit engagement:

a) Client evaluation

· Evaluating the integrity of management

· Communicating with existing auditors

· Making enquiries of other third parties

· Reviewing previous experience with existing clients

· Identifying intended users of the audited financial statements

· Assessing a prospective client’s legal and financial stability

· Evaluating the entity’s condition of accounting records and internal control structure.

b) Ethical and legal considerations

· Evaluating independence

· Assessing competence to perform the audit

· Determining ability to use due care

(40 marks)

(Grand total: 100 marks)

Your essay should include:

· Cover Page

· Grading Scheme

· Executive Summary

· Table of Content

· A short description on the background information of Arthur Andersen.

· Answer to the question

· List of References/Bibliography

· Appendices (if relevant)

BACHELOR OF ACCOUNTING (HONS

Guidelines

(1) Your mark in this coursework will carry a 40% weight in the assessment of your overall performance in this module.

(2) You will be working on this coursework individually.

(3) The assignment will be in an essay format of not more than 4,000 words.

(4) Appropriate APA referencing system will be employed where applicable.

(5) Your assignment should be type written, 1 ½ line spaced, font 12 Times New Roman and justify aligned. Please comb bind.

(6) Please provide an executive summary, table of content, page number, proper heading title for each part answered and references.

(7) Use an appropriate cover sheet.

(8) Please attach a copy of the grading scheme at the front of your coursework (after the Cover Page) during submission.

(9) The assignment will be submitted in Week 8 in class.

Assignment of Grades for Written Work

Written assignments will be graded according to the following distribution:

  • Content (thoroughness of preparation, information, and content)
  • Style (grammar, writing quality, clarity of writing at the sentence level)
  • Presentation (organization, clarity of writing at the paper level)

What this means in practice is that if you do the work, but don't organize your thoughts or write clearly, you will end with at most a C. However, you will not be given full credit for content if the lecturer cannot understand what you're saying, so if you don't write clearly, you will probably end up losing points on content as well.

BACHELOR OF ACCOUNTING (HONS)

Academic Dishonesty

As stated in the faculty Handbook, cheating, including plagiarism will not be tolerated. All written work, including paper summaries, must be your own work. If you wish to quote a source, you must do so explicitly, and with proper attribution. Any work that does not meet the requirements set out above will be treated as a violation of the academic honesty policy for the class, and dealt with accordingly.

The minimum penalty for a violation of the academic honesty policy is a zero on the assignment. Other penalties may include a letter grade reduction, failing the class, or, in extreme or repeated cases, dismissal from the program/college

BACHELOR OF ACCOUNTING (HONS)

Grading Scheme (Coursework)

SUBJECT : _____________________________________

SUBJECT CODE : _____________________________________

PORGRAMME : _____________________________________

STUDENT’S NAME :_____________________________________

Marks

Marks Awarded

Content

Regulatory framework for ensuring quality services

25%

Professional ethics and the accountant

25%

The auditor’s legal liability

10%

Acceptance and continuance of client relationships : Client evaluation

40%

TOTAL

100%

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: Arthur Andersen

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Tutorial Preview … exhibit formal research skills i.e. with a table of content, proper citations, references, and appendices. The coursework write up must be able to demonstrate critical analysis and application of both theory and pra…
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159119_MS_1_159119-16823-1-TM-MF-TTs200912-2275-23.docx (56.04 KB)
Preview: history where it has bowed its management and carved some powerful entrepreneurs over the United States. But before the Enron Scandal, it has seemed that the firm became far away from the moral principles which was laid down by Arthur Anderson. It was also stated that “Arthur Andersen told his partners that they needed to focus more on the needs of the public, rather than making a good living. And I think this idea of taking tough stands from a professional standpoint and fulfilling profes.....
159119_16823_1_TM__C_TTs200912-2275-23.docx (54.36 KB)
Preview: of Waste Management Company which made the investors of the company lose $ 6 billion and also an anti fraud injunction order was issued by the Securities and Exchange Commission of United States. These scandals were laid before the major scandal produced by Arthur Andersen in the name of WorldCom and Enron.The above scandals were not enough for Arthur Andersen, when the firm was again involved in the scandal of the Baptist Foundation of Arizona also known as BFA who successfully defrauded the in.....
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