Answer Q8 and Q9

8. Why do audit partners struggle with making tough accounting decisions that may be contrary to their client’s position on the issue? What changes should the profession make to eliminate these obstacles?

The audit partners struggle with making tough accounting decisions that may be contrary to their client’s position position on the issue as they would fear losing the revenues generated by ad on services such as consulting from their clients. Prior to the Sarbanes-Oxley ct of !""!# partners looking to maximi$e services they could provide to clients# namely consulting services# created a conflict of interest in the independence in the core relationship external auditor and clients. Thus# standards were created with Sarbanes-Oxley ct !""! to greatly limit the types of add o n services external auditing firms can perform. %hen the Sarbanes-Oxley ct enacted# this lack of independence was taken into account to reduce the types of add on services to greatly reduce the  partner’s hesitancy in making tough accounting decisions. The Securities and &xchange 'ommission (S&') should makes changes to eliminate the obstacles by enacting their rules that re*uired external au dit firms to rotate primary audit engagement partners of clients after after approximately five to seven seven years. This kind of rule rule was enacted to prevent too close of relationships between external audit firms and client management# which may lead to independence issues. +urthermore# reporting re*uirements by external auditing firms to their clients’ audit committees were mandated to include,

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'ritical accounting policies used lternative treatments of financial information within P that have been discussed

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with management amifications of the use of such alternatives and the treatment preferred by the

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accounting firms Other materials written communications between the auditor and management

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9. What has been done, and what more can be done to restore the public trust in the auditing profession and in the nation’s financial reporting system?

To restore the public trust in the auditing profession and in the nation’s financial reporting system# the government must enacted the strictest accounting reform in history and launched the Sarbanes-Oxley ct. The enactment of the Sarbanes-Oxley ct of !""! was an effort to make the changes. /t is given in the case# &nron and rthur ndersen both the external audit firm and management made unethical decisions which cause public trust to erode# these sweeping changes were necessary. oing forward# enacted laws including the re*uirements of the Sarbanes-Oxley ct of !""! should be periodically reviewed to determine if they have been ade*uate. /n cases where further unethical behavior leads to misstatement of financial statements which may mislead the investors and other impacted parties# studies should be p erformed to determine of additional laws or standards should be enacted.