Case 2.

2
Waste Management:
Due Care

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Waste Management Case

Relevant Technical Knowledge
PCAOB QC #20 - Paragraph #3
A firm has a responsibility to ensure that
its personnel comply with the professional
standards applicable to its accounting and
auditing practice. A system of quality
control is broadly defined as a process to
provide the firm with reasonable assurance
that its personnel comply with applicable
professional standards and the firm's
standards of quality.
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Waste Management Case

Relevant Technical Knowledge
PCAOB AS #13 - Paragraph #7
auditor's responses to the assessed risks
of material misstatement, particularly
fraud risks, should involve the application
of professional skepticism in gathering
and evaluating audit evidence.

Waste Management Case

Relevant Technical Knowledge
SARBOX Section 203
the lead audit or coordinating partner and
the reviewing partner must rotate off of
the audit every 5 years
SARBOX Section 206
requires a one year cooling off period
before an audit firm employee accept a
position as CEO, CFO, Controller, or Chief
Accounting Officer of a former client
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Psychology Literature How to Best Acquire Knowledge

Feature Repeated Case Experiences with

Feedback; and
Teach Technical Concepts within Real-Life
Contexts
Consider the following additional cases:

Enron: Independence
The Fund of Funds: Independence
Sunbeam: Due Care
WorldCom: Professional Responsibility

Epilogue Waste Management

Arthur Andersen and WMI paid $220

million to settle shareholder suits

WMI restated earnings, which

caused a $6 billion decline in the
value of the company shares

Epilogue Waste Management

Top WMI executives were barred from

acting as directors of public companies
ranging from a few years to indefinitely

Arthur Andersen partners related to the

engagement were barred from auditing
public companies ranging from 1 to 5
years
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