Case 1.7 Lincoln Savings and Loan
1721 words 7 pagesCas 1) The substance-over-form concept is explained by accountingtools.com as a concept in which “the information shown in the financial statements and accompanying disclosures of a business should reflect the underlying realities of accounting transactions, rather than the legal form in which they appear.” They go on to explain that the main point of the concept is that “a transaction should not be recorded in such a manner as to hide the true intent of the transaction.” The concept requires or assumes that someone is attempting to deliberately hide a transaction as one that meets GAAP standards although in reality the transaction would affect the financial statements differently than reported. This form of deceit was used over and …show more content…
It is obvious that he took a biased position and as such his ability to maintain independence vanished. Although Mr. Atchison did not receive any gifts or payments for his services for Lincoln, it does appear that he was more than compensated once he joined the company.
After joining ACC, Atchison was no longer bond to follow the various auditing regulations. As such, technically he was allowed to interact with Young’s auditors. He also waited until after the audit was concluded to prevent any SEC violations. Ethically he probably should not have interfaced with Arthur Young’s auditors. But being that he had experience and personal relationships with Arthur Young, it would have been in ACC’s best interest (although deceitfully) to have him attempt to persuade the auditors to agree to ACC’s reporting methods.
9) If fraud is detected throughout the course of their work, than they have a responsibility to report it to the clients and their own management teams. However it is not the primary responsibility of the auditor to uncover fraud. As pointed out in AU 316 paragraph 4 “it is management's responsibility to … detect fraud.” The auditor is there to give an independent opinion on the reliability of the financial statements. http://pcaobus.org/Standards/Auditing/Pages/AU316.aspx
Factors that mitigate this responsibility to uncover fraud include properly