Questions for reading 1: “Conflicts of interest and the case of auditor independence” by Don Moore et al.
What is an earnings restatement?
Why do the authors of reading 1 say that “we should view personal testimonials of auditor independence with skepticism”?
What does the phrase “our arguments suggest a pessimistic prognosis for would-be reformers” mean?
The shift in corporate ethics (described on pg 13) was from what to what?
Who benefits if auditors only appear to be independent?
Who suffers, if auditors appear to be, but are not in fact independent?
In 2000, the SEC proposed a rule that auditing firms should not be allowed to also provide consulting services to companies they are auditing. How did the accounting firms respond?
What is the last sentence of the section “a brief history of audit regulation”?
Summarize the 5 suggestions the authors of reading 1 make for increasing regulation of the auditor-client relationship.
Questions for reading 2: “Ameliorating conflicts of interest in auditing” by Mark Nelson
10. Nelson argues that recent accounting reforms improve financial reporting. In your own words, summarize the 4 ways that recent reforms are helpful.
11. According to the SOX, who chooses a company’s auditor?
12. How does Nelson argue against the accusation by Moore et al. that accountants only care about appearing independent?
Question for reading 3: “Reports of solving the conflicts of interest in auditing are highly exaggerated” by Max Bazerman et al. According to Bazerman et al…
13. How likely is it that auditors will be biased, but not aware of their bias?
14. How well does SOX solve the problem of auditor bias?
15. What are the 3 tools that tobacco and oil firms have effectively used to avoid disruption to their old ways of making money?
16. The 3 papers present many arguments. Which argument did you find most interesting or compelling?
