United States Surgical Corporation Audit Article

United States surgical Corporation study - Article ExampleAs the discussion stresses in 1981, USSC extended the useful lives of some(prenominal) of its fixed assets and adopted salvage value for some of these same assets for the first time. Are these changes permissible chthonian generally accepted accounting principles? Assuming these changes had a material effect on USSCs monetary condition and results of operations, how should the change have affected Ernst & Whinneys 1981 audit opinion? Assume that the current describe standard were in effect at the time.This paper outlines that the Securities and Exchange Commission was able to identify Michael S. Hope, a former partner of Ernst & Whinney. He did the audit of the monetary statements of United States Surgical Corporation in 1980 and 1981. such(prenominal) statements appeared to be steady when it comes to the earnings of the company. However, on the contrary, the company was losing money. This case led to some charges file d against US Surgical. In an investigation in 1984, it turned out that there were executives alleged of engaging in illegal practices. though SEC had pointed out US Surgicals to be guilty of fraud, this was not a backside of defense against Ernst & Whinney.Ernst & Whinney is a combination of companies with different cultures. Such differences raised conflicts of interest between consulting and auditing. Client opponent and antitrust issues caused so many problems.Should the company focused on consulting, it could have had provided a better passage for openness. As consulting appears to be a friend of companies, on the former(a) hand, conservative auditing was apparently an injustice to many companies. During this time, the auditors report-- though should have been substantiated by figures-was dependent on the subjective opinion of the auditor. If the present professional style of audit in an objective approached is used during this time, it could have had been effective if coupl ed with consulting services. This would help the clients progress on their financial stability. They would concentrate on their strengths and work on their limitations to balance it off.QUESTION 3 Prepare common-sized financial statement for USSC for the period 1979-1981. Also compute key liquidity, solvency, activity, and deriveability ratio for 1980 and 1981. Given these data, identify what you hope were the high-risk financial statement items for the 1981 USSC audit. ANSWERThe high risk financial statement items for 1981 USSC audit is in its profitability ratio. Retirement assets are recorded to be high. However, there is no concrete basis that supports nor aligns profit to assets, subjecting it to a doubt. QUESTION 4 What factors in the auditor-client relationship create a power imbalance in favor of the client Discuss measures that the profession could take to minimize the negative consequences of this power imbalance.ANSWERAudit reports greatly rely on the auditor. Misstatem ents would lead to a false report that often became the basis of victorious legal actions. A declaration of financial distress is crucial as it could create damage. On the other hand, the report of an auditor is affected by the way he understands the company. Although financial distress