Mha Textiles

MHA Textile Case Write Up

The role of an auditor is to provide opinions on financial statements and internal control effectiveness. The profession’s value is affirmed by the public when the opinions are accurate and free of error. When the auditor fails, the financial system suffers. In the case of MHA Textile, the company’s auditor is faced with a decision that will jeopardize his independence, his company, and the financial market.

If the auditor refused to provide any further guidance, he is undoubtedly going to spend more money and time auditing their financials. Nonetheless, the auditor would save a tremendous amount of time and capital if he sat down with Susan and helped her with MHA Textile’s financial statements. Since she is not familiar with FAS 146, she is bound to make many errors when recording the transactions associated with the closing activity of NYH’s decorative pillow facility. The auditor has the appropriate knowledge and experience to correctly record these transactions. If the auditor were to help Susan with the financial transactions, he could save potential costs for MHA Textile of having to reclassify their disposal activity. Furthermore, the engagement team would not have to conduct a thorough audit since a licensed CPA accountant and an employee of the company constructed the financials.

It might seem beneficial to help Susan since the auditor will inevitably conduct an audit of MHA Textile’s financials; however, the costs associated with helping Susan strongly outweigh the benefits. Independence is the most important ethical consideration of any auditor. Independence is jeopardized when auditors are put into the position of auditing their own work. In response to insufficient auditor independence, the Sarbanes-Oxley Act was passed in 2002. Section 201 of the Sarbanes-Oxley Act explicitly prohibits non-audit services performed for the audit client. Helping with an audit client’s bookkeeping is clearly outside the scope...