Enron

AC6640 SP212_3_Wolod

Accounting 6640: Auditing for Fraud

Spring Term II

Master of Accounting- Forensic Accounting Program

New England College

Henniker, NH

Case A.2: Waste Management, Inc.

Case Study Assignment: 10% of final grade Due: May 6, 2012

Directions:

Provide a summary and response to each of the questions located immediately following the “Case” in the Appendix of the supplemental text: Auditing and Accounting Cases; By Jay Thibodeau & Deborah Freier, 3rd edition, McGraw-Hill. ISBN:13:978-0-07-811081-8

1. An auditor’s independence means protecting either the internal or the external auditor from the parties whose interests might influence the creditability of the auditing process. When the auditor is given his or her independence, he/she makes true and accurate judgment of the information represented in the financial statements. Auditor’s independence is very significant in the auditing profession since it encourages integrity and good governance especially in government entities. Auditing independence is the ultimate watchdog for the government and the shareholders in many companies. This is because all the trust is vested in the work of the auditor who is supposed to prove that the recorded information is true and fair. Arthur Andersen as an external auditor in this company was affected where management ignored the auditing reports he submitted to them. In fact, some adjustments were made to the financial statements after Andersen had submitted the auditing report to hide some errors.

2. The review was effective initially, but with time the audit division lost its independence and succumbed to the traps laid by the management. That is why they just reported where the errors appeared and made some recommendations on what was supposed to be done. Therefore, the auditing division failed to qualify the reports in spite of the clear evidence that were available.

3. Proposed adjusting journal...