Chapter 4
Auditing and Accounting Cases Investigating Issues of Fraud and Profes (2).docx
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Auditing and Accounting Cases Investigating Issues of Fraud and Professional Ethics 4th Edition Case 2.6 Page 78 1. Refer to the fundamental principles governing an audit. Under the respon-sibilities principle, auditors are required to exercise due care and maintain professional skepticism throughout the audit. Based on the case information, discuss the ways in which the BLMIS auditor, David Friehling, disregarded his responsibility to uphold the fundamental principles governing an audit Solution Based on the facts of the case, due care was not exercised by the auditors. Auditors failed to conduct independent verification of BLMIS assets, review material sources of BLMIS revenue, examine bank account through which client funds flowed, verify liabilities related to client accounts or verify the purchase and custody of securities by BLMIS. This all shows a lack of intent on part of the auditors to gather and evaluate evidence to provide an opinion. Hence, they did not fulfill the Responsibilities principle. The auditor and/ or his relatives had accounts with BLMIS showing lack of professional independence as well. .
Auditing and Accounting Cases Investigating Issues of Fraud and Profes (2).docx
- Auditing and Accounting Cases Investigating Issues of Fraud and Professional Ethics 4th Edition Case 2.6 Page 78 1. Refer to the fundamental principles governing an audit. Under the respon-sibilities principle, auditors are required to exercise due care and maintain professional skepticism throughout the audit. Based on the case information, discuss the ways in which the BLMIS auditor, David Friehling, disregarded his responsibility to uphold the fundamental principles governing an audit Solution Based on the facts of the case, due care was not exercised by the auditors. Auditors failed to conduct independent verification of BLMIS assets, review material sources of BLMIS revenue, examine bank account through which client funds flowed, verify liabilities related to client accounts or verify the purchase and custody of securities by BLMIS. This all shows a lack of intent on part of the auditors to gather and evaluate evidence to provide an opinion. Hence, they did not fulfill the Responsibilities principle. The auditor and/ or his relatives had accounts with BLMIS showing lack of professional independence as well.