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Case 12.4: Surfer Dude Duds, Inc.:

700 words - 3 pages

Mark has several options as auditor for Surfer Dude, Inc. Substantial doubt will result in an unqualified audit opinion. An explanatory paragraph regarding the uncertainties is explained to reveal the auditors conclusion. "If the auditor concludes that the entity’s disclosures with respect to the entity’s ability to continue as a going concern are inadequate, a departure from generally accepted accounting principles exists." (Boynton & Johnsonp.907) Mark may also state an adverse opinion to reflect a departure from GAAP, or he could disengage himself from the audit.
A going concern explanatory paragraph may cause a “self-fulfilling prophecy” for Surfer Dude, Inc. Mr. Baldwin’s ...view middle of the document...

The public interests include clients, creditor grantors, government agencies, employees, and stockholders. The stakeholders of Surfer Dude Inc. rely on the honesty and integrity of the auditor and management. Criminal liability for violating ethical rules and statutes can result from a range of consequences. The board of accountancy may require continuing education or revoke the license of the CPA. The PCAOB has the authority fine CPA firms that do not comply with regulations. The PCAOB may also forbid an individual or an accounting firm from auditing public companies. The automatic disciplinary provision states that violations of AICPA statutes are punishable by imprisonment.
For example, Andersen’s firm did not test or disclose the company’s ability to continue as a going concern for Enron. If Andersen has looked into the company’s ability to continue as a going concern, the discrepancies would have been found sooner. “In the end, Arthur Andersen, LLP, settled the malpractice lawsuit out of court for $217 million without admitting any wrongdoing.” (p.144) CPA licenses were revoked for two of the firm’s partners who were a part of the audit.
Mark could use the Enron/Anderson case as an example of misstating financial statements to convince Mr....

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