1. External auditing is a special function as described by Chief Justice Warren Burger in a 1984 Supreme Court decision:

By certifying the public reports that collectively depict a corporations financial status, the independent auditor assumes a public responsibility transcending any employment relationship with the client. The independent public accountant performing this special function owes ultimate allegiance to the corporations creditors and stockholders, as well as to the investing public. This public watchdog function demands . . . complete fidelity to the public trust.

1. Auditors serve a number of parties. Which party is the most important?
2. Do you agree with Chief Justice Burgers characterization of the auditor as a public watchdog?

next qouestion

1. One part of Section 302 of the Sarbanes-Oxley Act states that the CEO and CFO:

Will certify in quarterly and annual reports filed with the SEC that the report does not contain untrue statements of material facts and that the financial statements and disclosures present fairly (in all material respects) the financial condition and results of operations of the issuer.

1. If top management is committing a fraud, do you think that they will refuse to certify the annual reports?
2. What do you think that they will do when faced with that requirement?