Questions from General Accounting

Q: Explain the legal basis for a cause of action against an auditor

Explain the legal basis for a cause of action against an auditor. What are the defenses available to the auditor to rebut such charges? How does adherence to the ethical standards of the accounting pr...

Q: Assume a third party such as a successor audit firm quickly discovers

Assume a third party such as a successor audit firm quickly discovers a fraud that the predecessor auditor has overlooked for years. Do you think this provides evidence supporting scienter? Explain.

Q: What are the legal requirements for a third party to sue an

What are the legal requirements for a third party to sue an auditor under Section 10 and Rule 10b-5 of the Securities Exchange Act of 1934? How do these requirements relate to the Hochfelder decision?...

Q: Valley View Manufacturing Inc., sought a $500,000 loan

Valley View Manufacturing Inc., sought a $500,000 loan from First National Bank. First National insisted that audited financial statements be submitted before it would extend credit. Valley View agree...

Q: In Arthur Levitt’s speech that was referred to in the opening quote

In Arthur Levitt’s speech that was referred to in the opening quote he also said: “…I fear that we are witnessing an erosion in the quality of earnings, and therefore, the quality of financial reporti...

Q: Maines and Wahlen state in their research paper on the reliability of

Maines and Wahlen state in their research paper on the reliability of accounting information: “Accrual estimates require judgment and discretion, which some firms under certain incentive conditions wi...

Q: According to the 2011 National Business Ethics Survey conducted by the Ethics

According to the 2011 National Business Ethics Survey conducted by the Ethics Resource Center, Generational Differences in Workplace Ethics, a relatively high percentage of Millennials consider certai...

Q: Krispy Kreme was involved in an accounting fraud where the company reported

Krispy Kreme was involved in an accounting fraud where the company reported false quarterly and annual earnings and falsely claimed that, as a result of those earnings, it had achieved what had become...

Q: Safety-Kleen issued a major financial restatement in 2001. The

Safety-Kleen issued a major financial restatement in 2001. The next year, the company restated (reduced) previously reported net income by $534 million for the period 1997–1999. PwC withdrew its finan...

Q: Revenue recognition in the Xerox case called for determining the stand-

Revenue recognition in the Xerox case called for determining the stand-alone selling price for each of the deliverables and using it to separate out the revenue amounts. Why do you think it is importa...