External Audit Case Study

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Case5.5 Phillips Petroleum Company
I believe that Bill Grant was justified in refusing to provide the requested workpapers to the grand jury at that time. Confidentiality is essential when the auditor performs auditing work. It’s a protection of the client’s confidential information to be exposure to competitors or in public, which may cause some risks for the company’s operation or management. Without the consent of the client, the CPA’s audit files should not be available to someone else. However, according to Code of professional conduct Section 301, which is effective from 1990, there are four exceptions of confidential client information. One of them is “Subpoena or summons and compliance with laws and regulations”, which means that if there is a subpoena, the auditing files and the information obtained by a CPA firm from the client is not privileged. Therefore, Bill Grant would not be justified if it happens nowadays.

A public accounting firm has the responsibility to support and help its partners and employees when they are subpoenaed to testify regarding a client. A public accounting firm should be responsible for the partners’ and employee’s actions under the appropriate supervision. If there is a subpoena, the accounting firm should contact its professional liability risk advisor or attorney, and communicate with the partners, the employees, the client or any parties involved. Then, figure it out the appropriate actions to take following the laws. The firm may need to permit the access to the client’s confidential information and be willing to corporate with testimony.

I believe the documentation included in tax accrual audit workpapers is likely affected by auditors’ knowledge that those workpapers can be obtained by the IFRS. To protect individual CPAs from legal liability, it’s essential to document the work properly. The preparation of good audit documentation can’t be done without the auditor’ knowledge of the auditing materials. Tax...
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