KPMG served as the independent audit firm of several of the largest subprime mortgage lenders. Identify the advantages and disadvantages of a heavy concentration of audit clients in one industry or sub industry.
Answer to relevant QuestionsAs noted in the case, there was an almost complete turnover of the staff assigned to the New Century audit engagement team from 2004 to 2005. What quality control mechanisms should accounting firms have in such circumstances ...Identify what you consider to be the three most important “take-aways” or learning points in this case. Rank these items in order of importance (highest to lowest). Justify or defend each of your choices.Was it appropriate for Ernst & Young to decide not to rely on AA Capital’s internal controls during the 2004 audits? Under what circumstances can auditors choose not to rely on a client’s internal controls?This case includes the following quote from a former PCAOB official: “The [audit] firm tends to be the subject of disciplinary action when there is a failure of oversight or supervision. Where a particular partner simply ...Maria Messina testified that when she learned of the accounting irregularities at Livent shortly after becoming the company’s CFO she felt “guilty by association,” which prevented her from revealing the fraud to ...
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