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dismiss their incumbent auditors and choose a higher - quality replacement ( represented by the size and level of firm, with Big Four being highest
dismiss their incumbent auditors and choose a higherquality replacement represented by the size and level of firm, with Big Four being highest quality; this decision may reflect a desire of clients to improve their financial reporting quality. A more recent study found that clients engage in "opinionshopping" by dismissing auditors prior to potentially receiving an adverse opinion on internal control and often do so later in the fiscal year, in response to anticipating a negative report on their internal control.
DISCUSSION QUESTIONS
From the SEC website or other sources, locate Daily Journal's Form K and review EY's report on Daily Journal's internal control over financial reporting. What were some of the weaknesses noted in this report?
Review the excerpt presented in the case of Daily Journal's Form K filed with the SEC June related to the dismissal of EY What type of disclosures are provided in this excerpt? What are some reasons that Daily Journal would provide these disclosures?
Review the excerpt presented in the case from Gerald Salzman's response to the SEC. Do you believe this response is consistent with the Form K filing related to the dismissal of EY What implications might this response have with respect to Daily Journal's internal control over financial reporting?
From the SEC website or other sources, locate Daily Journal's Form K filed July related to the appointment of BDO. What type of disclosures are provided in this filing? What are some reasons that Daily Journal would provide these disclosures? Note: Daily Journal filed two different Form Ks on July
Referring to the professional standards AUC what is BDO's responsibility with respect to communicating with EY
From the SEC website or other sources, locate Daily Journal's Form K filed February that announced the dismissal of BDO and engagement of Squar Milner. Compare the disclosures in this filing to those in questions and related to the dismissal of EY and engagement of BDO.
Why might adverse opinions on internal control over financial reporting prompt Daily Journal to change auditors? Are Daily Journal's auditor change activities consistent with the results of the academic studies summarized in this case? Why or why not?
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