Auditing

Community News

Duncan Takes the Stand; Judge Makes Potentially Reversible Decision

The Andersen obstruction of justice trial moved into high gear on Monday as the prosecution's star witness, former Andersen partner and head of the Enron audit team, David Duncan, took the witness stand.Repeating his guilty plea that was made earlier this year, Mr. Duncan stated under oath, "I obstructed justice.
Community News

Duncan Notes Sealed, Andersen Lawyer Takes the Fifth

Andersen got more bad news in court Friday as the firm's obstruction of justice trial continued into its fifth day. U.S. District Court Judge Melinda Harmon ruled that attorney-client privilege protects the notes of prosecutors' meetings with former Andersen partner and Enron audit engagement leader David Duncan who is expected to be the lead witness for the prosecution. Mr.
Community News

Accounting Firms Face Liability Insurance Crisis

On May 8, 2002, Andersen announced that approximately 2,000 of its people, including almost 200 partners, will join Deloitte & Touche immediately in many offices across the U.S.
Community News

More Andersen Partners Testify for the Prosecution

Thursday's proceedings in the Andersen obstruction of justice trial saw the prosecution introduce testimony from Andersen personnel in an attempt to establish that members of the Big Five firm knew of accounting irregularities at Enron long before last fall's massive document destruction began.Andersen partner Ben Neuhausen testified that he destroyed 150 to 200 e-mail messages relating to Enron after the Houston office received a memo from Andersen lawyer Nancy Temple reminding them of the firm's document retention policies. Mr.
Community News

Welcome to The Hotel Kenneth Laya

One of the prosecution's witnesses in the Andersen trial, Andersen partner James Hecker, testified that he wrote the lyrics to a humorous song, making light of the firm's relationship with Enron. Mr. Hecker worked in Andersen's Houston office but was not a member of the firm's Enron audit team.The song title, Hotel Kenneth Laya, refers to Enron's former CEO, Kenneth Lay.

AICPA Issues Guide for Taking on New Audit Clients

The American Institute of CPAs (AICPA) has released a practice aid for accounting firms that conduct audits of publicly-owned companies. It expects some of these firms will be taking on increased numbers of new publicly traded clients and professional staff following the Enron collapse.
Community News

Andersen Lawyers Request Access to Duncan Notes

Lawyers for Big Five firm Arthur Andersen LLP on Wednesday requested access to notes of conversations with former partner David Duncan who headed up Andersen's Enron audit team. Mr. Duncan pleaded guilty to obstruction of justice on April 9. As part of his plea agreement, Mr. Duncan agreed to cooperate with the Department of Justice in its investigation and prosecution of Andersen. Mr.
Community News

Opening Arguments and First Testimony in Andersen Trial

Lawyers for the Department of Justice and Arthur Andersen LLP gave opening arguments Tuesday in U.S.
Community News

Jury is Selected for Andersen's Trial; Midwest Offices Sold

After a day of questioning, the initial pool of 106 potential jurors was whittled down to 16 - a jury of 12 plus four alternates. At stake is the reputation and probably the remaining life of what was until recently the fourth largest public accounting firm in the world. The jury is composed of nine men and seven women. During the day Monday several potential jurors were struck from the pool for a variety of reasons.

AICPA May Ban Reports on 'Hypothetical Transactions'

Auditors may soon be prohibited from playing a controversial role in structuring transactions to achieve a desired effect on financial statements. The change would take effect under a draft of an auditing standard proposed by the AICPA's Auditing Standards Board (ASB) on April 30, 2002.
Community News

Raiders From Rival Firms Roil Andersen's Retired Partners

Worried that raiders from rival firms are making deals to buy Andersen's business units at less than fair value and hire its partners despite non-compete contracts, a group of Andersen's retired partners has filed a request for a restraining order. The retired partners are seeking emergency arbitration to enforce non-compete and member firm contracts and secure the funding of their pensions and other retiree benefits.
Community News

CEO Jim Copeland Explains Deloitte's Audit Improvements

At a time when many prominent accounting opinion leaders seem to be focusing externally on the audit reforms others should undertake, Deloitte & Touche (D&T) CEO James Copeland took the lead in publicly addressing the audit improvements his firm has undertaken on its own. Speaking to the Economic Club of Detroit on April 29, 2002, Mr. Copeland explained five specific audit improvement initiatives. D&T is considering a rotation requirement for client service personnel below the partner level and for audit partners who lead subsidiary audits.
Community News

Three Big Five Firms Get Sued over 'McScandal'

Three Big Five accounting firms are dismayed to find themselves named as defendants in a lawsuit over the 'McScandal' from the rigging of McDonald’s promotional games.

House Passes Accounting Reform Bill After Lively Debate

On April 24, 2002, after several hours of lively debate, the House of Representatives passed H.R. 3763, the Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 (CARTA). The bill, which was sponsored by Rep. Michael G. Oxley and passed by a vote of 334 to 90, is the one most supported by the accounting profession. But many lawmakers feel more stringent measures are needed.
A&A

Senate Bill of Rights To Address Audits, FASB, Options

On April 22, 2002, as the Financial Accounting Standards Board (FASB) prepared for a new chairman and the House of Representatives prepared for a vote on its leading accounting reform bill, Senator Carl Levin unveiled the Shareholders' Bill of Rights. Tougher and more comprehensive than the House bill, this new Senate bill will address audit reforms, accounting standard-setting, executive stock options, and more.Senator Levin is chairman of the Senate Permanent Subcommittee on Investigations.

Judge Rules 'Seriously Botched' Audit Is Not Fraud

Despite a public clamor for tighter regulation of auditors, a U.S. Court of Appeals ruled on April 19, 2002 that a "seriously botched" audit that led to a plunge in stock prices is not grounds for a securities fraud lawsuit. Violations of GAAPThe case sets important precedent as an interpretation of the Private Securities Litigation Reform Act (PSLRA), a law passed by Congress in 1995 over President Clinton's veto.

IFAC Leads Auditors into the Internet Age

Years ago, white collar criminals broke into computer files for such old-fashioned reasons as greed and misappropriation of funds. In those days, controls were as simple as putting a lock on the computer room door. Today, hackers may bring down a web site just for the fun of it, and assessments of internal controls often require a unique combination of technological and cross-border expertise.
Community News

Andersen U.S. Audit Practice May Splinter Into Pieces

The hope of merging Andersen's U.S. practice as a unit into another Big Five firm has all but disappeared, scattering the firm into several pieces both in the U.S. and overseas. Andersen has reached a tentative agreement to turn over some of its U.S. audit practice to Big Five firm KPMG. As many as 150 audit and tax partners and nearly 2,000 other staff members would join KPMG under the terms of the agreement. Offices participating in the proposed acquisition include Boston, Boise, Houston, Denver, Dallas, Los Angeles, New Orleans, Philadelphia, St.
Education & Careers

Financial Scandals Turn Forensic Accounting Into a Hot Job

The growing number of financial scandals and frauds in recent years have made forensic accounting one of the fastest growing areas of accounting and one of the most secure career paths for accountants. On April 11, 2002, ABC News carried a fanciful item imagining a new TV series named "Fraud Squad" that would dramatize this fast growing field. "You can almost hear the pitch now," writes ABC.

Auditor 'Value' Rating Scores a Dismal 'D'

Attention auditors: corporate America has graded the value you are providing them and your report card doesn't look too good.Auditors, as a group, received an overall score of 61 out of 100, according to the results of a just-released survey conducted by market research firm NFO WorldGroup.

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