Nazeeha Badran
October 30,2012 PTL Club clear-The Harbinger of things to come? 1. What similar factors led to the demise of both Laventhol &Horwath, and Anderson?
Both Laventhol and Horwath, and Arthur Anderson accepted clients that were risky just to keep their revenues up. L&H knew there were things wrong with PTL, especially since they were doing things that were hidden from the Board, like the payroll account book, which was secret. The Bakker’s would call the senior L&H partner to keep the books updated. Anderson and L&H allowed their clients to use aggressive accounting practices that were questionable. Anderson destroyed Enron’s documents because they knew an SEC investigation was imminent. L&H and…show more content… L&H should have analyzed the amount of memberships sold to the capacity and nights the members would be allowed to stay and realized that things weren’t adding up.
5. Why do you think audit firms are willing to accept high-risk clients?
Audit firms are willing to accept high-risk clients in order to increase their revenues.
6. What analytical and audit procedures could have led to Deloitte and L&H to have more easily detected and reported PTL club’s financial problems?
Deloitte and L&H should have compared PTL’s financial statements from one year to the next. They should have calculated financial ratios to see their ability to pay off their debts and how much their liabilities are. They should have also examined PTL’s lifetime membership amounts and how reasonable it is to fulfill their membership promises.
7. Why would a staff auditor want to be a “part of the client’s team” and consent to questionable practices rather than being an “independent watchdog” and contest such practices?
A staff auditor would want to be a part of the client’s team in order to fit in. The staff auditor would consent to questionable practices because they are afraid to ask questions, and get the client angry at them. The staff auditor may not want to seem stupid for asking a question. The auditor could be scared to get a negative review of their
