Description
Research the Internet for recent litigation, censures, and fines involving national public accounting firms. Examples of litigation cases against national public accounting firms include fines by regulatory authorities and censures by professional societies.
Write a three to four (3-4) page paper in which you:
- Analyze the primary accounting issues which form the crux of the litigation or fine for the firm, and indicate the impact to the firm as a result of litigation or fine. Provide support for your rationale.
- Examine the key inferences of corporate ethics related to internal controls and accounting principles which lead to the litigation or fine for the accounting firm.
- Evaluate the primary ethical standards of the accounting organization’s leadership and values which contributed to approval of the accounting issues and thus created the litigation or fines in question.
- Identify specific conduct violations committed by the organization and accounting firm in question. Next, create an argument supporting the actions against the organization and accounting firm, based on the current professional code of conduct for independent auditors and management accountants.
- Make a recommendation as to how regulators and professional societies may prevent this type of behavior in question for the future. Provide support for your rationale.
- Use two (2) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Explanation & Answer
Attached.
Running head: LITIGATION, CENSURES, AND FINES
Litigation, Censures, and Fines
Institutional Affiliation
Date
1
LITIGATION, CENSURES, AND FINES
2
Introduction
Earnest &Young LLP is a service company providing auditing, assurance, enterprise risk
management, among others services. The company was levied a huge fine by the Public
Company Accounting Oversight Board for the violation of the board’s rules when auditing
Medicis Pharmaceutical Corporation which is a drug manufacturer. Earnest &Young LLP was
the external auditor for Medicis Corp. for over 20 years but failed to perform its responsibility
effectively leading to the heavy fines.
The Accounting Issues Which Led To Fine for Earnest &Young LLP and the Impacts
Earnest &Young LLP was involved in accounting issues which led to the firm being
fined by the Public Company Accounting Oversight Board (PCAOB). The main accounting
issues were involving three Earnest &Young audits in Medicis Pharmaceuticals Corporation
whereby the firm violated PCAOB standards and rules (PCAOB, 2012). This is because the firm
did not employ professional skepticism when it was conducting the audits of Medicis
Pharmaceutical Corporation. Earnest &Young failed to evaluate the sales returns reserve of
Medicis Corp. and accepted the firms accounting which was not agreeing with the U.S. generally
accepted accounting principles (GAAP). PCAOB thus found that Earnest &Young had violated
its standards when the firm accepted knowingly the company’s basis of accounting without
supporting it by audit evidence. The accounting issues had an impact to Earnest &Young
because the company was fined $2 million penalties. Four o...
Review
Review
