WK. 4 DISCUSSION QUESTIONS TO ANSWER

2.Good points, Ivelisse, about whether the variance in fees constitutes a conflict of interest. The conflict is really about conflicting interests. The fee alone is one issue, but the more serious issue would be auditing your own work. Obviously, this would be a conflict of interest. The fee issue might induce pressure on the auditing firm to work a certain way, but, alone, it wouldn’t be enough. All of the big accounting firms do both accounting work and auditing work. However, the auditing work does subject them to certain extra requirements and exposure to liability.

Some of this liability is discussed in the text. For example, auditors can be sued by more than just the client. They could be sued by investors, creditors, or even the Government. (Mintz, 2017). The text explains how they can be subject to the common law, which is a court created liability, and statutory law, which include SOX and other legislation. (Mintz, 2017). Honestly, it’s hard for auditors to keep up with all of the potential ways that they can be liable.

So, in light of this liability, why would an accounting firm want to engage in auditing services? Whether they are conflicts of interest or not, the liability alone makes doing both challenging. If the provision of the services is billed at the same rate, how does the accounting firm recoup its investment, given its potential for liability? 

3. Nice description of what a conflict of interest is. I like understanding what the technical requirements are for conflicts of interest. That helps me better identify them when I see them. What is this really about? I think the reason why we are so concerned about conflicts of interest regarding auditors, in particular, is because of the auditor’s heightened duty to the public. As explained in the text, an auditor’s duty really comes from how their services impact third parties, rather than the client. It is important to note that accountants also have special duties to the public. However, an accountant also has an important duty to provide competent services to his/her client. The auditor’s duty is much less focused on the client and more on the public and ensuring the reliability of financial information released by the company being audited. (Mintz, 2017).

This relationship can seem odd when you think about it. The auditor is employed by the client, just like an accountant. They should certainly provide competent services. However, their role is to ultimately show stakeholders (including the public) what the client is doing.

Why is this so important? Why should the client be so interested in showing stakeholders the most accurate picture of what they are doing? Can this help their business and how?

4. Good points by Dave about having independent auditors. This really underscores the importance of oversight and catching mistakes. At my job, once we finish a determination, two reviewers look at it to try to catch any mistakes before the determination goes out to the public. I have not submitted a determination yet that hasn't had a least one mistake. We all make mistakes. It's important that we learn from them and improve our writing.

In the context of accounting work, it is important that accountants allow others to catch their mistakes. As much as it hurts to know that we are not perfect at our jobs, when mistakes are caught the accountant provides a better service to their client, and to the public. Accounting work can be complex, and it is important to learn how to minimize making the same kinds of errors.

What kinds of things to you all do to minimize mistakes? How will your techniques help you in a future accounting position?

5. What are some of the ways in which an accountant commits fraud? Explain at least two ways that fraud occurs.

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