The Securities and Exchange Commission (SEC) found that Bally Total Fitness Holding Corporation, a nationwide commercial operator of fitness centers, fraudulently accounted for three types of revenues it received from members. The SEC also charged the audit firm and six partners for their roles in the accounting violations. Visit the SECs website (www.sec.gov) and search the link to Litigation Releases to locate Litigation Release 20470 issued on February 28, 2008 against Bally Total Fitness Holding Corporation to learn more about this revenue fraud.

a. Read the release and the accompanying compliant in this matter and briefly summarize the types of alleged frauds. For each fraud, identify the management assertion(s)/or the audit objective(s) that was violated.

b. Return to the opening page on the SEC website and search the link for press Releases to locate the December 17, 2009, announcement of the SEC charges against the audit firm and the six partners. Summarize the SEC charges against the audit partners.

c. Read the press release and briefly summarize the SEC description for the nature of risks associated with the Ballys audit engagement.

d. Read the complaint against the audit engagement partner, who served as the 2001 and 2002 engagement partner. What factors caused the audit firm to recognize Bally as a high risk audit client for 19962003?