Case Study Essay

Words: 1006
Pages: 5

5-2: ZZZZ Best 1. I think that auditors should be held liable for failing to discover fraud. There are many ways the fraud could have been discovered over the years if the auditors performed an objective audit that followed rules and regulations. It is an auditor’s obligation to perform an audit with objectivity, skepticism, independence, and objectivity. Ernst & Whinney failed to meet these criteria. The auditors did not follow professional skepticism because when Minkow asked them to sign a confidentiality agreement to not follow up with any contractors, insurance companies, or building owners. This is not something to simply accept from Minkow. Ernst clearly did not perform a thorough audit and did not perform the necessary …show more content…
Aside from the moral aspects, auditors also want to make sure that the client is financially stable. If there is a going concern for the client, there might be possible liabilities for both the firm and the client. Any other indicators like high turnover rates, material weaknesses in controls, or low current ratios, increases risk of fraud and misstatements. Any of these issues could also be an incentive for fraud. 2. There are a few red flags that go off after evaluating management at Jost Furnature. First off, there have been a few different controllers in the past four years. This high turnover rate poses the question of why so many different people have left the position. There were also financial re flags such as late loan payments, low current ratios, and some weaknesses in internal controls. Jerry Jost even mixes his personal funds with his business funds. It was also mentioned that the auditors were not allowed to contact the previous auditors. According to the Six Pillars of Characters, I would not submit a bid for this company. The Six Pillars of Character include trustworthiness, respect, responsibility, fairness, caring, and citizenship. Clearly this company has some ethical dilemmas and do not follow these pillars. Management does not seem trustworthy or responsible at all,