DISCUSSION: COMPREHENSIVE CASE ANALYSIS ASSIGNMENT INSTRUCTIONS OVERVIEW The student will complete one Discussion: Comprehensive Case Analysis in this course. INSTRUCTIONS The case must be selected f

In case you need high-quality essay, we are here to help you. Would you like us to handle your paper? Use our writing services for better grades and meet your deadlines.


Order a Similar Paper Order a Different Paper

DISCUSSION: COMPREHENSIVE CASE ANALYSIS ASSIGNMENT INSTRUCTIONSOVERVIEWThe student will complete one Discussion: Comprehensive Case Analysis in this course. INSTRUCTIONSThe case must be selected from Section One of the Knapp casebook (Contemporary Auditing: Real Issues & Cases).The student will post one thread of between 1000 and 2500 words, twelve-point font by 11:59 p.m. (ET) on Sunday of the assigned Module. For this thread, the student must support their assertions with at least five scholarly or practitioner sources which must be listed and cited using the current APA standards for graduate classes. Acceptable sources include both refereed scholarly journals, practitioner journals and textbooks. A Statement of Christian World View must be included in which the student will express an opinion on whether the auditor or client appeared to act in accordance with a Christian World View. At least one Bible verse must be cited to support this opinion.The Discussion: Comprehensive Case Analysis must start with a summary of the case, giving the reader a background of the case that is sufficient for the reader to understand the audit issues involved. Then, each question must be written, in order, and answered. The answers must be supported by citations to references. The Statement of Christian World View may be in a separate location or may be incorporated throughout the case analysis.

DISCUSSION: COMPREHENSIVE CASE ANALYSIS ASSIGNMENT INSTRUCTIONS OVERVIEW The student will complete one Discussion: Comprehensive Case Analysis in this course. INSTRUCTIONS The case must be selected f
This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/ Case 1.13 – AA Capital Partners, Inc. Kristen Keith Liberty University This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/Summary John Orecchio and Paul Oliver started AA Capital Partners, Inc., an investment advisory firm, in February 2002 with the goal to be their own bosses and run a successful company. Orecchio and Oliver were partners in running the business, but Orecchio was responsible for managing the business’s investments and every day functions. Orecchio decided to convince union management to entrust AA Capital with the union’s pension funds. In 2004 Orecchio had six unions that were willing to trust AA Capital with a total of $200 million and his plan was working successfully. The $200 million was allocated to four private equity funds under AA Capital; AA Capital Equity Fund being the largest. AA Capital’s CFO, CCO, and only accountant was Mary Beth Stevens. She was responsible for keeping the company in compliance and also assisted Ernest & Young in performing their annual audit. In 2004 Gerard Oprins, an Ernest & Young partner, was in charge of overseeing the audit and Wendy McNeeley was the audit manager. Both were unfamiliar with the company, but did research on the legitimacy of the business and its operations. The independent review was performed by John Kavanaugh. Ernest & Young decided not to rely on AA Capital’s internal controls and substantive testing would be done on all account balances. During the testing of the large Equity Fund, four unusual transfers to Orecchio were found for a total of $1.92 million that were titled “tax payments or tax distributions.” When Mary Beth Stevens was questioned about the $1.92 million transferred to Orecchio she stated the IRS had wrongfully charged him numerous fees and tax payments, and either the IRS would repay for the money or Orecchio himself would have to cover it over time. However, McNeely was not satisfied with these explanations and looked further into the situation. She asked Stevens to provide all This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/documentation regarding the transfers, but did not get a reply to the request. Subsequent audit testing was done for January 1 – March 31, 2005 and notes were made that nothing unusual was found even though another $482,000 was transferred to Orecchio during the period for additional “tax distributions.” When the audit team returned to AA Capital for the 2005 audit, McNeely was out on maternity leave and replaced by Jennifer Aquino. Aquino found that the $1.92 million transferred to Orecchio had not been repaid, but instead had risen to $5.7 million in “tax loans.” Stevens was once again asked to provide all documentation available for the transfers, but nothing was received. The audit team stated “other than the inquiry of Stevens and sending an e-mail to Orecchio, there were no other audit procedures to perform on the Transfer because the audit team didn’t have anything to audit.” Ernest & Young auditors made the decision that they would not continue with the audit until the $5.7 million in “tax loans” were paid back and documentation for the transfers were provided. In August 2006 an investigation of the transfers was started by the SEC and resulted in changing the opinion of the 2004 audit. In 2010 Orecchio pleaded guilty to embezzling about $24 million which included the $5.7 million that was not used for tax purposes, but for his fancy lifestyle. Orecchio had a mistress he met in a nightclub that he bought $1.4 million worth of jewelry for, a boat, fancy cars, and renovated the nightclub she worked at to help her get promoted. He told his partner he was investing $8.7 million in a real estate development project, but he only invested $1.3 million of it and used the other $7.4 million to renovate his Michigan horse farm. He also rented a Caribbean island in order to throw a party for his mistress and her friends. He also had several high end nights in Las Vegas funded by the company’s Equity Fund. He also used large amounts to try to bribe politicians and government This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/officials to invest their labor union pension funds in AA Capital. Besides the $24 million he embezzled he also admitted to investing $30 million of AA Capital’s money in a Las Vegas sports drink company that failed and not much money was recovered. The SEC then issued an Accounting and Auditing Enforcement Release in 2010 regarding the unqualified opinion audits from 2004 and 2005 stating all the oversights Gerard Oprins, Wendy McNeeley and the rest of the audit team had made regarding the “tax loans.” The auditors were then suspended from practicing before the SEC for three years. Oprins and McNeeley appealed the decision. Oprins was determined not guilty of reckless or highly unreasonable conduct because the transfers were not brought to his attention as being outside normal business transactions. For McNeeley, however, it was determined she missed important signs and did not follow up on the transfers appropriately. The Judge decided three years was too long of a suspension because of her clear history and lowered it to just one year suspension. Orecchio was sentenced to 25 years for the fraud and embezzlement of AA Capital’s Equity Fund. He helped the federal law enforcement authorities catch several union officers that accepted bribes and his sentenced was lowered to nine years and four months. He also had to repay the $50 million plus back to the equity fund and all of his remaining assets were taken away. Once the scheme was revealed his mistress left him and his wife left him taking their three kids. He attempted suicide in 2009, and then in 2010 when being sentenced requested to be placed in a New Jersey prison so his kids could visit. Questions This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/1. What factors likely contributed to the oversights made by the Ernst & Young auditors during the 2004 AA Capital engagement? Identify measures that audit firms can implement to minimize the likelihood of such oversights on audit engagements. The biggest oversight for me was the fact that the request to review the transfer documentation was not followed up. McNeeley should have never allowed that to slide by her. Notes should have been further documented and Oprins, as a partner, should have been very interested in knowing the details of the $1.92 million. Also, the fact that neither Oprins or McNeeley knew much about the business to begin with or the individuals running the business didn’t help. They had only heard good things and did not see a reason in doubting the owners. This oversight could have been avoided by spending more time the Orecchio himself and questioning him about the transfers. All of these oversights would have been avoided if “experienced auditors spend more time with the client during audit planning and execution and share relevant information amongst audit team members (Pieter, 2004)” like required. 2. Was it appropriate for Ernst & Young to decide not to rely on AA Capital’s internal controls during the 2004 audits? Under what circumstances can auditors choose not to rely on a client’s internal controls? “The auditor’s decision about relying on controls in an audit of financial statements may depend on the particular facts and circumstances (Wilson, 2009).” In this case, neither McNeeley or Oprins knew about the business so I believe it was smart not to rely on the internal controls. This audit was in 2004 and the Sarbanes Oxley Act was really just getting starting. After all of the previous scandals, not relying on internal This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/controls was probably a good decision if any possible doubts about the company. Usually internal controls are just relied on in order to reduce substantive testing and cut down audit costs. Also, testing the controls over a process can cover auditing an area. If you audit the controls and they are working effectively, you feel more comfortable about the transactions within the process, that nothing inappropriate would slip through the control. 3. What audit procedures do professional auditing standards require that auditors apply to related-party transactions? Would any of these procedures have resulted in Ernst & Young discovering the true nature of the cash transfers made to John Orecchio? “Current auditing standards for the examination of related party- transactions specify a threestep process that involves sequentially (1) identifying related parties, (2) examining related-party transactions (e.g., ascertaining business purpose), and (3) ensuring proper disclosure of the transactions (Louwers, 2008).” If Ernst & Young had followed this three step process in regards to related-party transactions they would have most likely discovered the fraud going on by Orecchio. However, even though these requirements are in place, it is not always so simple. During the audit, “auditors must often rely on management representations for information supporting identification and valuation of related-party transactions (Louwers, 2008).” In this case, Stevens was asked for the documentation for the transfers and nothing was received. It was then McNeeley’s responsibility to follow up on the documentation or make note of the lack of evidence provided. In my audit experience, I have found most times when evidence is not provided it is because something is being covered up and they would rather just not provide information and get fussed at than to get fussed at about the actual problem. This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/4. What objectives do auditors hope to accomplish in performing “subsequent period” audit tests? Auditors are required to review the subsequent period for any events that have occurred that would make changes to the financial statements audited. AU 711.10b states, “Inquire of and obtain written representations from officers and other executives responsible for financial and accounting matters (limited where appropriate to major locations) about whether any events have occurred, other than those reflected or disclosed in the registration statement, that, in the officers’ or other executives’ opinion, have a material effect on the audited financial statements included therein or that should be disclosed in order to keep those statements from being misleading.” In this case, the subsequent event of another “tax distribution” of $482,000 should have been followed up on and reviewed. 5. Do you agree with the assertion of John Ellingsen that an audit engagement partner is not “responsible for all decisions made in the course of an engagement?” Defend your answer. What quality control implications does that assertion, if true, have for audit firms? I believe that as an audit partner it is impossible for them to be in tune with all of the details the audit consists of. However, I do believe that if an audit partner is going to sign the audit report, they should feel fully confident in the material within the report. McNeeley noted that the $1.92 million was transferred from the Equity Fund to John Orecchio during 2004 to cover tax payments. I would think an audit partner would see This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/this note while reviewing and want to know that support was reviewed. This seems to be a big red flag any time money is paid to an owner from the company that is not salary involved. The note stated that either the IRS or Orecchio was required to pay the money back. The audit partner should have ensured there was a time line for this repayment and ordered a follow up on the issue throughout the year. It was also noted in the case that Oprins’s audit review often consisted of just making sure someone else, such as an audit manager, had reviewed the audit area (Mahony, 2010). Overall, I do believe that this is something that should not have slipped by the engagement partner. I know if I approve something such as an audit report, I’m going to want to make sure it will not get me in trouble later. This study source was downloaded by 100000793288509 from CourseHero.com on 01-11-2022 08:28:51 GMT -06:00 https://www.coursehero.com/file/11245270/Case-113-AA-Capital-Partners-Inc/ Powered by TCPDF (www.tcpdf.org)References Mahony, Robert (2010) Gerard A.M. Oprins, CPA, and Wendy McNeeley, CPA: Securities and Exchange. p 23 Louwers, T. J., Henry, E., Reed, B. J., & Gordon, E. A. (2008). Deficiencies in auditing related-party transactions: Insights from AAERs. Current Issues in Auditing, 2 (2), A10-A16. Retrieved from http://search.proquest.com/docview/217505266? accountid=12085 PCAOB (1996) AU 711.10b http://pcaobus.org/Standards/Auditing/Pages/AU711.aspx Pieter, v. W., & Spies, M. (2004). The dilemma of RISK AND REWARD. Accountancy SA, , 2-6. Retrieved from http://search.proquest.com/docview/215230355? accountid=12085 Wilson, Keith (2009) PCAOB http://pcaobus.org/standards/auditing/documents/as5/guidance.pdf

As a student, I know you sometimes get frustrated working on school projects or even struggle to complete assignments on time. You need online writing help to rid you off such troubles. And since we understand your needs, we provide you with reliable and professional academic writers to complete your projects on time and at an affordable price.


Order a Similar Paper Order a Different Paper

Looking for this or a Similar Assignment? Order a Paper Now