The Audit Failures of Both Enron and WorldCom Were Examples

question 22

Multiple Choice

The audit failures of both Enron and WorldCom were examples in which the leadership responsibilities for quality work within the accounting firm were overshadowed by fears that losing a key client would

• A)result in shareholder losses from reduced company profitability.
• B)require additional audit procedures and increase the fees paid by the companies to the accounting firm.
• C)negatively influence the results of the firm's inspection.
• D)negatively impact individual auditors' performance evaluations.

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Definitions:

Indirect Method

A financial reporting approach used to generate a statement of cash flows by adjusting net income for changes in non-cash account balances.

Declared

Often refers to the official announcement by a company's board of directors of a dividend or other corporate action.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use.

Original Cost

The initial monetary value of an asset, including the purchase price and any related acquisition costs, but before depreciation or amortization.