Which Of The Eight GAAS Was E & Y Alleged To Have Violated?
Chapter 2 Assignment: Merry-Go-Round
a. Which of the eight GAAS was E&Y alleged to have violated?
1. General standard: E&Y failed to assign professionals with sufficient skills to adequately solve the problem.
2. Examination standard 1: According to the lawsuit, E&Y did very little planning in preparation to handle the financial recovery of the Merry Go Round company.
3. Examination standard 2: The professionals assigned to the Merry Go Round project obviously had very little knowledge of the environment that the company was in. As an example, the cost-cutting strategy only led to $11 million in savings, which us much lower than the projected loss of $200 million.
b. In the same way that an accounting firm must investigate the quality of a potential new client, it is the responsibility of the client to investigate the …show more content…
Trustworthy licensed professional consultants.
2. Standards of procedure implemented across the industry will achieve a basic higher level of performance.
3. Registration and certification of consultants will encourage those professionals to perform their duties to the highest quality for fear of punitive action.
4. Standardization of industry rules and a code of conduct will dissuade consultant professionals from outlandish expense spending.
5. Black and white industry standardization will make the execution of lawsuits much easier. In most cases, it will be obvious which party did not fulfill their contract responsibility.
Disadvantages:
1. The cost of standardization and the clerical red tape involved with the enforcement of rules will be passed onto the client in the form of higher consultation fees.
2. The team setting the standards for the industry will consist of multiple industry consultation experts that may set the rules to more benefit the consultant than the
a. Which of the eight GAAS was E&Y alleged to have violated?
1. General standard: E&Y failed to assign professionals with sufficient skills to adequately solve the problem.
2. Examination standard 1: According to the lawsuit, E&Y did very little planning in preparation to handle the financial recovery of the Merry Go Round company.
3. Examination standard 2: The professionals assigned to the Merry Go Round project obviously had very little knowledge of the environment that the company was in. As an example, the cost-cutting strategy only led to $11 million in savings, which us much lower than the projected loss of $200 million.
b. In the same way that an accounting firm must investigate the quality of a potential new client, it is the responsibility of the client to investigate the …show more content…
Trustworthy licensed professional consultants.
2. Standards of procedure implemented across the industry will achieve a basic higher level of performance.
3. Registration and certification of consultants will encourage those professionals to perform their duties to the highest quality for fear of punitive action.
4. Standardization of industry rules and a code of conduct will dissuade consultant professionals from outlandish expense spending.
5. Black and white industry standardization will make the execution of lawsuits much easier. In most cases, it will be obvious which party did not fulfill their contract responsibility.
Disadvantages:
1. The cost of standardization and the clerical red tape involved with the enforcement of rules will be passed onto the client in the form of higher consultation fees.
2. The team setting the standards for the industry will consist of multiple industry consultation experts that may set the rules to more benefit the consultant than the