Ptl Case Study Essay examples

1391 Words Nov 2nd, 2012 6 Pages
Case study
PTL Club-The Harbinger of Things to Come?

1) To see how similar the cause of collapse of both Laventhol & Horwath and Andersen, let’s examine these two cases from two perspectives. a. From the clients’ side
The last straw which led to the demise of these two CPA firm were PTL club to L&H and Enron to Anderson. PTL Club had a very weak internal control. As it is pointed out in the case, whenever Jim Bakker needed money, he could just simply make a board member introduce a resolution for a bonus. Auditors could not find necessary documents to support expenses and revenue. Compensation was excessive far beyond the regulation of IRS. (Louwers, 867-872) Enron was engaged in aggressive accounting practices. It took
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The actual sales were almost triple of the limit. However, how was the over sales allocated. Was the over sales occurred between May 31, 1984 and October 24, 1984 significant enough to subject to disclosure? We have no clues from the information provided. But given that Jim Bakker was all the time utilized the good reputation of PTL Club’s audit, Deloitte had reasons to exercise reasonable professional skepticism and did an in-depth investigation, not to mention that Deloitte expressed a going- concern on the draft of 1984 audit report concerning current assets of only $8.6 million against $28.5 million current liabilities and all the other red flags signaling possible fraud.
As for L&H, since limited number of partnerships was widely published, it had no excuse for not being acknowledged this issue. As a CPA firm, it just exercises due professional care in the performance of the audit and the preparation of the audit report.
5) High risk, high return. Companies willing to accept high-risk clients are striving to provide the so-called value-added service to its clients. They choose to push the edge of law and regulation to earn high return. This is the nature of market economy.
6) Bonus-approval procedure in PTL Club was a joke. Documentations for large amount of expenditure were lost. Careful inspection of records and documents alone would be able to

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