DISCUSSION QUESTIONS 1. Look up the term corrupt in the dictionay. What is its d
ID: 2578806 • Letter: D
Question
DISCUSSION QUESTIONS 1. Look up the term corrupt in the dictionay. What is its definition? Was corrupt appropriately applied to the actions of Arthur Andersen? 2. The issues that overturned the Andersen verdict were based on faulty jury instructions, not on whether Andersen was in fact guilty or innocent. Based on the information in this case and other information you know, do you believe Andersen violated the law? 3. Do you believe that the Supreme Court's opinion overturning the lower court's decision was appropriate? 4. Should the SEC and the Department of Justice have tried Andersen as a firm or should they have targeted specific individuals who had engaged in acts the two bodies believed to be unlawful? 5. Although Andersen's conviction was overturned, do you believe that its employees acted in an ethical manner? Comment on the actions of David Duncan and Nancy Temple. Which of these parties do you lieve was more responsible for the Andersen saga? 7. The class action lawsuit against Andersen also named the Canadian Imperial Bank of Com- merce, JPMorgan Chase, Citigroup, Merrill Lynch, and Credit Suisse Group as codefen- dants with Andersen. Why would the plaintiffs name so many entities in their lawsuit? Merrill Lynch and Credit Suisse asked a U.S. appeals court to rule that the complaint should not have been certified as a class action suit. Why would these entities make such a claim?Explanation / Answer
1.
Corrupt is to act dishonestly for personal gain. What AA did was not personal gain, as the gain was the organisation. It only wanted to keep the job of being an auditor, forever.
2.
AA violated the law, there's no doubt about this as they were aware of what was going on
3.
Yes the Supreme Court was correct. Auditors are watchdogs. They should bark when something is amiss. Not wait for the bone.
4.
Yes they could have targeted the individuals but this is how the case is framed. It is a partnership so all partners as a whole are liable
5.
Yes employees receive monthly salaries and are just protecting their bread and butter not building mountains of gold
6.
David Duncan was more responsible. He had the 'punch'
7.
Banks are sent Letters of Confirmation" They could have signed and reported "Not agreeable" with what was stated. So they should be also charged if they said otherwise
PART II
1.
No GM prices shown in question data?
2.
At the first instance if Current Assets < Current Liabilities they should report it
3.
Clients do "window dress" accounts. So the auditor should have been doubtful as the risk would be showing by mere ratio analysis.
4.
There was a recession going on so it's obvious they would be protecting the jobs held by staff
5
Concerns of going concern is when the company is about to topple due to cash insufficiencies. If they pumped in more funds and teh management who came in knew to handle the transactions there should be no problem
6
It could be in a certain situation as self fulfilling. Take an individual he/she knows the cash they could spend. They should undertake only "cutting the coat according to the cloth" Thus they had to prioritise
PART III
1. No, professional standards are very firm . It disallows auditors from doing other jobs than being an auditor
2
Even before SOX it was very clear on the appointment of auditors. Yes after SOX it has been tightening the rules but it is still vague and could be evaded
3.
Advantages - the obvious additional income
Disadvantages - they could cover their own tracks of evasive acts and hide evidence of fraud
4.
Smaller numbers means those companies get a larger share of the cake, which is not only unfair but they continue to carry on regardlessly. They should rotate auditotrs, every 3 - 4 years, so that they cannot continue to carry forward their games of fortune, specially the risk of shareholders losing their investments and other stakeholders of their areas of concern
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