Contemporary Auditing 9th Edition by Michael C. Knapp
ISBN-13: 9781133187899
ISBN-10: 1133187897
The past decade has arguably been the most turbulent and traumatic in the history
of the accounting profession and the independent audit function. Shortly after the
turn of the century, the Enron and WorldCom fiascoes focused the attention of the
investing public, the press, Wall Street, and, eventually, Congress on our profession.
Those scandals resulted in the passage of the Sarbanes-Oxley Act of 2002 (SOX) and
the creation of the Public Company Accounting Oversight Board (PCAOB).
Next came the campaign to replace U.S. generally accepted accounting principles
(GAAP) with International Financial Reporting Standards (IFRS). That campaign
stalled when the subprime mortgage crisis in the United States caused global stock
markets to implode and global credit markets to ?freeze? during the fall of 2008. Many
parties insisted that inadequate audits were a major factor that led to the onset of the
most severe global economic downturn since the Great Depression. That economic
downturn claimed many companies that had been stalwarts of the U.S. economy,
most notably Lehman Brothers. The huge investment banking firm filed for bankruptcy
in September 2008 just a few months after having had its annual financial
statements ?blessed? by its audit firm.
As Congress and regulatory authorities struggled to revive the U.S. economy, news of
the largest Ponzi scheme in world history grabbed the headlines in early 2009. Investors
worldwide were shocked to learn that Bernie Madoff, an alleged ?wizard of Wall
Street,? was a fraud. Law enforcement authorities determined that billions of dollars
of client investments supposedly being held by Madoff?s company, Madoff Securities,
did not exist. The business press was quick to report that for decades Madoff Securities?
financial statements had been audited by a New York accounting firm and had
received unqualified audit opinions each year from that firm. The auditing discipline
absorbed another body blow in 2010 when a court-appointed bankruptcy examiner
publicly singled out Lehman Brothers? audit firm as one of the parties most responsible
for the Lehman Brothers debacle.
