In fact arthur andersen the once highly regarded

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Unformatted text preview: these firms dominate the audits of large companies is because they have well-known names and strong reputations. Entities who buy assurance from these firms know that potential investors and creditors will recognize the auditing firm’s name and reputation and feel assured that they therefore face reduced information risk. The fact that the entity being audited typically hires and pays the auditor also highlights just how important auditor objectivity and independence are to the investing public. In fact, Arthur Andersen, the once highly regarded member of the former “Big 5” international accounting firms, failed in 2002 at least in part because the firm lost its reputation as a high-quality, objective auditor whose opinion could be relied upon by investors and creditors. Later in the book we will discuss some recent changes enacted to strengthen the independence of financial statement auditors, including prohibiting auditors from providing many kinds of consulting services to their pu...
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This note was uploaded on 12/08/2012 for the course ACCT 564 at Washington University in St. Louis.

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