Required:

Which three of the “Seven Signs of Ethical Collapse” are most likely to create challenges (like material misstatements) to the auditors ability to “certify” the financial statements and internal controls. 

For each of the three signs, explain how it threatens the fair presentation of client financial statements.

Jennings identifies seven common ethical signs of moral meltdowns in companies that have experienced ethical collapse. The common threads she found that make good people at companies do really dumb things include (1) pressure to maintain numbers; (2) fear and silence; (3) young 'uns and a bigger-than-life CEO (i.e., loyalty to the boss); (4) weak board of directors; (5) conflicts of interest overlooked or unaddressed; (6) innovation like no other company; and (7) goodness in some areas atones for evil in others. 36 We briefly review them next.