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1. Identify quality control procedures for accounting firms that might have resulted in Peat Marwick avoiding the problems it experienced on the NSMC engagements. Do accounting firms presently employ these procedures?
Peat Marwick should have asked Arthur Anderson of the reason why they resigned the audit of NSMC. Instead of asking "the question" they asked them "whether there was any reason it should not accept NSMC as an audit client." And they relied that there were not aware of a reason to deny NSMC as an audit client. Because of this they engaged in the audit.
Accounting firms presently employ this procedure in order to find out the truth of what the reason for the resignation of the predecessor was all about. This gives an audit firm an idea of what has undergone and can be one criteria of choosing the audit client. By asking the predecessor why they left the audit client they have insurance if the predecessor deceives them into thinking there was nothing wrong. Usually you don't find an audit firm not partaking a audit cause there was nothing wrong; audit firms do not just give up on audits for other firms to take.
2. Do you believe that Arthur Anderson had a professional or moral responsibility to inform Peat Marwick why it resigned as NSMC's audit firm. Defend your answer. (Recognize that SAS No. 84. "Communications between Predecessor and Successor Auditors," was not in effect in the late 1960's.)
I believe that Arthur Anderson Had the professional and moral responsibility to in form Peat Marwick of the possible outcome that may occur during such audit. Arthur Anderson is a professional and when someone comes up to you asking f ...