Week Five Case Studies Team D ACC 492 January 15‚ 2007 CASE 8.1 FRED STERN & COMPANY‚ INC. 1. Observers of the accounting profession suggest that many courts attempt to ¡§socialize¡¨ investment losses by extending auditors¡¦ liability to third-party financial statement users. Discuss the benefits and costs of such a policy to public accounting firms‚ audit clients‚ and third-party financial statement users‚ such as investors and creditors. In your view‚ should the courts have the authority
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Fred Stern & Company‚ Inc. (Ultramares Corporation v. Touche et al.) Fred Stern & Company‚ Inc. was a rubber importer based out of New York City during the 1920s. This capital-intensive business was in high demand for numerous industries at the time. As such‚ Fred Stern & Co. relied heavily on lenders to finance its daily operations. In 1924‚ Fred Stern & Co. approached a finance company named Ultramares Corporation for a loan of $100‚000. Before accepting the terms‚ Ultramares Corp. requested
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investors and creditors. It would benefit them greatly because the audit work should be done with better care therefore they can use the statements with more trust. I feel that the judge should have authority to decide who auditors are liable to. In this case is clear that Touche was negligent and they should have liability to all foreseen third parties. 2) In section 11 of the securities act of 1933 the auditors have the burden of proof and in the securities exchange act of 1934 section 18 the plaintiffs
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public accounting firm was hired by Fred Stern & Co. to audit its record and to prepare and certify a balance sheet exhibiting Fred Stern financial health. Touche was aware that this balance sheet would be shown by Fred Stern to shareholders and banks for financial dealing. Touch certified greater assets than liabilities to be in excess of $1million of which in fact the business was actually insolvent and the statement prepared by Fred Stern was false. Fred Stern said nothing to Touche about the specific
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Overview Fred Maiorino began his career at Schering-Plough in 1958 at the age of 28. He had been a successful sales representative till Jim Reed took over the position of General Sales Manager for South Jersey sales district in 1987. In 1988‚ Fred received his lowest ever performance evaluation of “Good” which was lower than any other sales representatives’ in the district. In fact‚ Fred’s salary increase at the end of the quarter was less than half of the average of other sales representatives who
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Based on the new duties assigned to Fred the Supervisor he has not been around much‚ therefore not available to interact or communicate with his employees. Aware that the company will be conducting appraisals in a few weeks it is imperative that Fred is available to help with the evaluations and provide feedback based on the employee’s work performance. During the semi-monthly meetings‚ Fred advised his employees that the company believed in having an open-door policy in which “any time employees
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& Partners Re : Audit of Moss Green Ltd. Company structure Moss Green Ltd. is a wine grower and producer of medium to high quality wines‚ located in Western Australia’s Margaret River region. Tickit Associates was Moss Green’s previous auditing company and we were engaged immediately after it listed on the Australian Stock Exchange to take over as auditors. The company is successful in exporting internationally‚ especially in the United Kingdom supermarket chain‚ Safebury. Mr.Tom Green
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Additional Cases for the Course The case readings have been developed solely as a basis for class discussion. The case readings are not intended to serve as a source of primary data or as an illustration of effective or ineffective auditing. Reprinted by permission from Jay C. Thibodeau and Deborah Freier. Copyright © Jay C. Thibodeau and Deborah Freier; all rights reserved. 1••• ( Case 61 ® Enron Enrori’s First Few Years hi~ 1985 Enron had assets along the three major stages of the supply
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Appreciative Internal Audit: A Strength-Based Approach to Quality System Auditing – A Case Study. Jon Morris President JDQ Systems Inc. Vancouver‚ BC‚ Canada Introduction Traditional internal audits fulfill an important need for companies with fresh ISO 9001:2000 Quality Management System implementations‚ but for companies with mature systems‚ those registered for more than five years‚ an innovative approach to auditing called “Appreciative Internal Quality Audit” can take them beyond compliance
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actually in the UK. Because it was chartered in Luxembourg and Grand Caymans‚ Bank of England (BOE) thus thought itself as a secondary role in supervising BCCI‚ thereby reducing the level of scrutiny imposed on BCCI. In addition‚ BCCI has an uncommon auditing system. Price Waterhouse (PW) was the accountants for BCCI overseas‚ while Ernst & Whitney in charged of BCCI holdings. Two sets of auditors being used was to avoid them from publishing a meaningful consolidated accounts and make sure neither of
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