Regarding The Case of Enron: Enron Corporation was an American energy, commodities and services company based in Houston Texas that is arguably one of the biggest corporate collapses in recent history. Requirement: Questions: 1) What accounting events lead to the collapse of Enron? 2) Which parts of the independence requirements and ethical framework were compromised during the final audit year? Explain and provide examples. 3) What were the main accounting and auditing outcomes after the Enron collapse?

Regarding The Case of Enron: Enron Corporation was an American energy, commodities and services company based in Houston Texas that is arguably one of the biggest corporate collapses in recent history. Requirement: Questions: 1) What accounting events lead to the collapse of Enron? 2) Which parts of the independence requirements and ethical framework were compromised during the final audit year? Explain and provide examples. 3) What were the main accounting and auditing outcomes after the Enron collapse?

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Completing A Quality Audit

Section: Chapter Questions

Problem 31CYBK

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During the early 2000s, the role of accounting and the auditing profession in the United States changed due to the discovery of several impactful accounting scandals. Using the Strayer Library, research the economic climate surrounding two accounting scandals. What conditions caused accounting and the auditing profession's role to change during this time? What major changes occurred as a result of the accounting scandals?
In 2001 and 2002 there were several high-profile US corporate collapses associated with misleading financial statements and accounting practices. Following these collapses, new laws were introduced to improve the quality of financial reporting. a) In your opinion, will further regulation prevent deliberately misleading reporting? Explain. b) Are additional laws likely to prevent corporate collapses? Why or why not? c) How important is the enforcement of financial reporting requirements in promoting high quality reporting?
Below are several statements about the Sarbanes-Oxley Act (SOX).1. SOX represents legislation passed in response to several accounting scandals in the early 2000s.2. The requirements outlined in SOX apply only to those companies expected to have weak internal controls or to have manipulated financial statements in the past.3. Section 404 of SOX requires both company management and auditors to document and assess the effectiveness of a company’s internal control processes that could affect financial reporting.4. Severe financial penalties and the possibility of imprisonment are consequences of fraudulent misstatement.5. With the establishment of SOX, management now has primary responsibility for hiring an external audit firm.6. The lead auditor in charge of auditing a particular company must rotate off that company only when occupational fraud is suspected.Required:State whether the answer to each of the statements is true or false.
You are an assurance services senior at Bailey & Associates and have noted the following independent issues in relation to the audit of Sleek Ltd: The accounting system at Sleek Ltd did not operate effectively during the first year of operations. Consequently, some general ledger accounts had to be based on estimates, as the actual data relating to these balances had been lost. (i) (ii) As a result of cost constraints, the directors of Sleek Ltd did not implement effective internal controls for debt collection. The debtors' tunover is 3.2 times. (iii) Due to increased competitive pressures, Sleek Ltd has recently moved the manufacture of some of its clothing lines out of Melbourne into regional areas. While Sleek Ltd saves around 20% in costs, the manufacturing process takes longer and on several occasions late delivery has resulted in lost sales. Required: Explain the impact of each of these separate issues on your assessment of audit risk, the materiality level and the audit strategy…
The following events occurred during 2016 for various audit clients of your firm. Consider each event to be independent and the effect of each event to be material. 1. A manufacturing company recognized a loss on the sale of investments. 2. An automobile manufacturer sold all of the assets related to its financing component. The operations of the financing business is considered a component of the entity. 3. A company changed its depreciation method from the double-declining-balance method to the straight-line method. 4. Due to obsolescence, a company engaged in the manufacture of high-technology products incurred a loss on the write-down of inventory. 5. One of your clients discovered that 2015’s depreciation expense was overstated. The error occurred because of a miscalculation of depreciation for the office building. 6. A cosmetics company decided to discontinue the manufacture of a line of women’s lipstick. Other cosmetic lines will be continued. A loss was incurred on the sale of…
Identify one (1) real-life ‘financial reporting accounting fraud’ that occurred post 1990 (i.e. in the last 30 years), in any country, and answer the following questions: a) Discuss what specific accounting regulations were violated?
An example of an event occurring in the period of the auditor’s field work subsequentto the end of the year being audited that normally will not require disclosure in thefinancial statements or auditor’s report is(1) serious damage to the company’s plant from a widespread flood.(2) issuance of a widely advertised capital stock issue with restrictive covenants.(3) settlement of a large liability for considerably less than the amount recorded.(4) decreased sales volume resulting from a general business recession
You were assigned to audit the financial statements of Swansea Corporation as at and for the year ended December 31, 2021. Your senior asked you to draft a memo on materiality and tolerable error for your client. Swansea Corporation has incurred substantial net losses due to COVID-19 pandemic. Up to 2019, it has been profitable. Which of the following is least likely to be your starting point in computing materiality? Group of answer choices Normalized net income Net loss Total assets Normalized revenue
You are an assurance services senior at Bailey & Associates and have noted the following independent issues in relation to the audit of Sleek Ltd: (i) The accounting system at Sleek Ltd did not operate effectively during the first year of operations. Consequently, some general ledger accounts had to be based on estimates, as the actual data relating to these balances had been lost. (ii) As a result of cost constraints, the directors of Sleek Ltd did not implement effective internal controls for debt collection. The debtors’ turnover is 3.2 times. Required: Explain the impact of each of these separate issues on your assessment of audit risk, and the audit strategy that would be adopted.
An analyst assessed a company and determined the company reported a "high quality of earnings." This implies that management issued a press release indicating it was not aware of any fraud during the current year. the company’s management exercised little or no discretionary influence in reporting financial statement information to shareholders. management has used its influence in determining the dollar amounts reported on financial statements. income statement items reported during the current period can be expected to reflect future income levels.