Required: "I'm not a bu Provide plausible reasons why the company is performing poorly despite the new incentive what they're well, and th compensation plan. sulupsA Another or P1-19. Moral hazard and the accounting profession "Accountin L.O. 1-1, L.O. 1-3) (Difficult - 20 minutes) accountin In the late 1990s and early 2000s, accounting firms came under scrutiny for providing non- Required: auditing services to their clients. Statistics for the (then) "Big Five" accounting firms (Andersen, Deloitte & Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers) indicate that about How would 45% of their revenues came from auditing, 25% from tax work, and the remainder from con- sulting and other services, which included information systems consulting and internal audits. P1-23. A Some observers called for a ban on the provision of non-audit services by accounting In the past, firms. They argued that auditor independence was being compromised under the status cost if the quo. intangible As a partial response to this lobbying, in late 2000 the US Securities and Exchange Com- create a p mission (SEC) adopted new rules requiring public companies to disclose the amount of fees other wor paid to their auditors separately for audit and non-audit services. were rec In the wake of the collapse of Enron in 2001, there were renewed calls for the separation Sin of audit and non-audit services. On February 6, 2002, Deloitte & Touche announced that it have the would separate its accounting and consulting divisions; a week earlier, PricewaterhouseCoopers revaluat made a similar announcement. Previously, the consulting arm of Arthur Andersen had become tion opt a separate consulting firm now known as Accenture. both of the Required: gnitnuboas bris ashfammyas noitshmomlagy torq Requi Discuss the relevant issues raised by the above facts in relation to financial accounting theory. P1-20. Efficient securities markets penogest-culumbe mont song L.O. 1-5) (Easy - 5 minutes) Explain why accounting reports are useful to investors even if securities markets are efficient the