The Securities and Exchange Commission (SEC) regulates public companies. The SEC has found that some of these companies have violated GAAP by using creative accounting practices to mislead investors and creditors regarding the health of their company.
Use the Internet or Strayer Library to research a recent accounting scandal within the last five (5) years where the SEC accused public companies of accounting irregularities.
Write a three to four (3-4) page paper in which you:
1.Analyze the audit report that the CPA firm issued. Ascertain the legal liability to third parties who relied on financial statements under both common and federal securities laws. Justify your response..
2.Speculate on which statement of generally acceptable auditing standards (GAAS) that the company violated in performing the audit..
3.Compare the responsibility of both management and the auditor for financial reporting, and give your opinion as to which party should have the greater burden. Defend your position. .
4.Analyze the sanctions available under SOX, and recommend the key action(s) that the PCAOB should take in order to hold management or the audit firm accountable for the accounting irregularities. Provide a rationale for your response..
5.Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources..
Your assignment must follow these formatting requirements:
•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions..
•Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length..
The specific course learning outcomes associated with this assignment are:
•Analyze the required generally accepted auditing standards, professional ethics, and legal liability of the auditor..
•Assess how the Sarbanes-Oxley Act has affected auditing..
•Evaluate an audit report..
•Evaluate objectives for conducting audits, and compare management’s and auditors’ responsibilities..
•Use technology and information resources to research issues in auditing..
•Write clearly and concisely about auditing using proper writing mechanics..
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The Logitech International Audit Scandal
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The Logitech International Audit Scandal
The Logitech International Scandal is a technology manufacturing firm, which has been order by the Securities and Exchange Commission (SEC) to pay a fine of about 7.5 million dollars for misrepresenting its financial 2011 financial results and other accounting violations. According to (Securities and Exchange Commission, 2016) the company’s former director of accounting Sherralyn Bolles and former controller Michael Doktorczyk were fined 25,000 and 50, 000 dollars respectively.
The Audit Report that the CPA Firm Issued
The Logitech International Scandal audit report inflated the company’s operating income in order to satisfy the demands of the earnings guidance. However, this was against the purpose of audit report, which is meant to reveal the actual financial position of a firm. This major purpose of an audit firm is critical for the development of investor confidence. The professional CPA firm is supposed to exercise “Professional Skepticism”, which involves a critical assessment of the evidence that an audit produces. The misrepresentation of the financial position of a company by an audit firm produces three major kinds of liabilities. Mann & Roberts (2012) asserts that accountants can civilly and criminally liable for the actions under the 1933 and 34 acts. According to (Clarkson, Miller & Cross, 2016) initially, a professional owed only liability to those they had contractual relationships. However, this has changed especially among the accounting firms, have the duty of care, duty of honesty and duty of correctness. The CPA firm that performed the Logitech International 2011 audit is liable for tort claims that result……………………………………………………………………………………………………………………………………………..
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