case 2

Topics: Audit, Financial audit, External auditor Pages: 1 (352 words) Published: November 8, 2013
1918 : Arthur Androids form an audit firm called Androids & Co. For many years, the Androids’ motto was “Think straight, talk straight” as it emphasis on honesty. 1987 : David Lawrence appointed as Androids’ partner in charge of auditing Enronaa’s accounts. His job was to check Enronaa’s accounts and to make sure that they fairly represent the state of the business. 1997 : US SEC found Androids guilty of issuing materially false and misstatement audit reports on Solid Waste financial statements for the period 1993 through 1996. Androids and Solid Waste agreed to pay USD 229 million to settle the class-action suit. The Solid Waste case followed Androids’ decision to pay USD 110 million to settle a lawsuit on audits at Sunbaemic. Both cases are the point of discussion between David and Ken Bailey, a junior partner to solve the Enronaa’s case. 2001 : David began to painfully explain the technical intricacies of Enronaa’s accounting to Ken. Both of them knew that the firm is in deep trouble and another scandal in the likes of Enronaa may end their business. The future of 85,000 staffs in 390 offices in 84 countries lies in David’s hand.

Obviously, the decision-maker of the case is David Lawrence; one of the Androids’s partners. He is in charge of the Enronaa’s accounts for the past 16 years since 1987. He will decide whether to proceed with shredding Enronaa’s documents or not due to the lawsuit by SEC.

Major Issue
The major issue is threat of coming lawsuit for not adhering to the Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAAS). For examples, issuing false and misleading reports and improper accounting practices. This problem had happened few times before the Enronaa’s case such as Solid Waste and Sunbeamic cases. Being an accounting and auditing firm, those principles are vital in ensuring the sustainability of the firm itself. Upcoming lawsuit on Enronaa’s issue really...
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