1. Do you believe that auditors should be held liable for failing to discover fraud in situations such as ZZZZ Best, where top management goes to great lengths to fool the auditors? Answer this question with respect to the ethical and professional responsibilities of audit professionals when conducting an audit.
2. Discuss the red flags that existed in the ZZZZ Best case and evaluate Ernst & Whinney efforts with respect to fraud risk assessment. Do you think Ernst & Whinney relationship with ZZZZ Best influenced risk assessment and the work done on the audit?
3. These are selected numbers from the financial statements of ZZZZ Best for fiscal years 1985 and 1986:
What calculations or analyses would you make with these numbers that might help you assess whether the financial relationships are reasonable? Given the facts of the case, what inquiries might you make of management based on your analysis?
4. What factors do you think motivated Minkow to return to his evil ways after becoming a respected member of the community following his release from prison in the ZZZZ Best fraud?
5. Using Kohlberg stages of moral development, how would you characterize Minkow actions after being released from prison in the ZZZZ Best fraud? Explain the effects of Minkow actions on the stakeholders who relied on him to act in a professional manner.