The casestudy is about Androids is under attack as it was already in the news, and what made Androids a tastier target was the fact that Enronaa was not the first time. Its start from they had used accounting practices that allowed Enronaa to hide its debts, but really these are all within the context of fair value accounting. Androids was critics that the auditors were incompetent, at worse, they deliberately
overlooked irregularities at Enronaa in order not to lose the lucrative stream of consulting and other work it provided.
Androids also had prior entanglements with the Securities and Exchange Commission (SEC). Androids agreed to pay the SEC a civil penalty of USD 7 million to settle charges ...view middle of the document...
So, SEC found that
Androids’ representations were materially false and misleading.
While, Solid Waste’s financial statements were not presented fairly, in all material respects, in conformity with GAAP. Androids had allowed the management of Solid Waste to use improper accounting to inflate its operating income and other measures
of success. It was the largest restatement of results in the history of the SEC. Besides that, SEC found Androids failed to ensure that all known misstatements were quantified and all likely misstatements were estimated. SEC also found that Androids knew or was reckless in not knowing that the auditors of the financial statements on which Androids issued unqualified audit reports during those years that were not conducted in accordance with GAAS.
Androids thereby, engaged in improper professional conduct. The Solid Waste case followed Androids’ decision to pay USD 110 million to settle a lawsuit on audits at Sunbeamic, another US client found to have less than reliable accounts. David and Ken knew that the firm would be in deep trouble for its
role in Enronaa’s collapse. Androids was already under probation with the SEC and another scandal in the likes of Enronaa would mean the end of their business. The sessions would pressure Androids’ auditors to view accounting issues Enronaa’s way. Androids knew that what Enronaa wanted and usually sought to give it to them. The Enronaa account had become so lucrative for Androids that the firm was unwilling to