2. What are some ways to ensure that an auditing finn does not find itself in the...

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2. What are some ways to ensure that an auditing finn does not find itself in the position that Deloitte &

Touche did in the Livent case? The negative publicity that has been given to firms like Liven!, Enron, Parmalat, and WorldCom during the last decade has made fa very interesting reading, but it has also made auditors nervous. More and more investors are asking questions like, "How much confidence can I really have when I read in an auditor's statement that a company's practices adhere to generally accepted accounting principles?" or "How can a company go bankrupt shortly after having its books audited by an independent auditor?"

Two recent high-profile cases have been evident at Lehman Brothers in the U.S. and Liven! in Canada.

In 2008, an executive at Lehman Brothers wrote a letter to senior management expressing his concern that the company was concealing the true risks on its balance sheet and therefore misleading investors about its financial condition. The board of directors Instructed the company's auditors (Ernst & Young) to interview the executive and investigate his concerns. The auditas did so, but when they met with the board of directors. the auditors did not mention the executive's allegations. Not too long afterward, Lehman Brothers went bankrupt.

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Business Essentials

ISBN: 9780137069866

6th Edition

Authors: Ronald J. Ebert

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