Question

Today, a very high percentage of publidy traded companies are audited by only four very large public accounting firms. These firms also do a high percentage of the consulting that is done for publidy traded companies. How does this fact complicate the dedision regarding whether CPAs should be allowed to invest in companies audited by their firm? Suppose IBM audit contract. you were a CPA and you had Invested in 1BM when 18M was not one of your firm's dlients, Two years later, after IBM's stock price had fallen considerably, your firm won the You will be involved in working with the IBM audit. You know that your firm's rules require that you sell your shares immediately. If you do sell immediately, you will sustain a large loss. Do you think this is fair? What would you do? 1033 AM 2 5 6 8

Answer 1

Today a very high percentage of publicly traded companies are audited by only four very large public accounting firms. These firms also do a high percentage of the consulting work that is done for publicly traded companies. How does this fact complicate the decision regarding whether CPAs should be allowed to invest in companies audited by their firm?

It will complicate to the CPA’s which invest in companies audited by their firm because some of the CPA’s will indicate with their conflict of interest.

Suppose you were a CPA and you had invested in IBM when IBM was not one of your firm’s clients. Two years later, after IBM's stock price had fallen considerably, your firm won the IBM audit contract. You will be involved in working with the IBM audit. You know that your film's rules require that you sell your shares immediately. If you do sell immediately, you will sustain a large loss. Do you think this is fair? What would you do?

I would like to sell all of the invested by me because I do not want to replace the rule. On the other hand, the stock price had fallen. It means, they have internal problems with their finance statement.