Accounting theory

Case study

Que: Worldcomet is one of Enronoff's lessors. The CFO of Worldcomet is very different in his approach with disclosures in general. In fact, the two CFOs clash all the time.

The CFO of Worldcomet strictly adheres to the wording of some of the accounting standards. However, he only does so to try to find words that allow him to misrepresent certain accounts to his advantage. So far he has been able to debate his way out of getting a qualified audit because his auditors have only sent inexperienced auditors to audit his work.

This is about to change, as the CFO is now being audited by some that has taken Accounting Theory seriously during his degree.

How do you think this new auditor should address the situation:

A)What accounting standard or corporate legality can the auditor quote to this CFO? Summarise this standard or corporate legality & the right paragraph.

B)Explain how this standard applies to the CFO's behaviour.

C)make a letter describing the CFOs behaviour to the auditor's supervisor - alerting the supervisor of the CFO's behaviour - critically and from an ethical perspective.