The objective of this study is to understand how small and medium audit practices (SMPs) deal with the obligation to conform to evolving norms, given their limited resources and the fact that they serve a client base of mainly small and medium‐sized enterprises (SMEs). Semi‐structured interviews held with 36 respondents working in 33 SMPs revealed that the main response of some SMPs’ to conflicting normative, material and client constraints was to eliminate the normative constraints by exiting the field to which the constraints pertained. When this was impossible, they resorted to less radical strategies. All strategies eventually led to adverse effects, including loss of expertise by some firms and practitioners, a condition that exacerbates the fragmentation within the accounting profession. Disenchanted by an increasingly demanding normative environment, the majority of respondents dealt with their disillusionment by mechanically applying the updates, a process that can lead to lower audit quality. Although the accounting profession was attempting to overcome a confidence crisis by issuing the updates, it ended up ignoring its less visible members and thus triggered upheavals with potentially irreversible consequences. In addition, banks may have been involved in narrowing the audit market for SMPs.
On December 20, 2017, the Supreme Court of Canada ended the suspense surrounding 20 years of court cases when it found the accounting firm Deloitte & Touche (Deloitte) guilty of negligence in its audit of the 1997 financial statements of Livent Inc. As part of a concurrent process, the Discipline Committee of the Institute of Chartered Accountants of Ontario (now CPA Ontario) also had to rule on the conduct of the professionals involved in auditing Livent. This case study asks students to play the role of members of the Discipline Committee assigned to judge the work performed by Deloitte's auditors. The students should be able to identify instances of noncompliance with professional standards, mainly Canadian Auditing Standards 200 and 240, and determine whether the auditors should be found guilty of professional misconduct. The students will be asked whether they would have arrived at the same verdict as did the Discipline Committee members.
On November 19, 1998, Toronto entertainment company Livent Inc. filed for protection under the Companies' Creditors Arrangement Act, further to issuing a press release stating that the company's audited financial statements contained irregularities. This highprofile bankruptcy serves as a reminder that Canadian companies are not immune from financial manipulations. The proposed case study lets students act as the auditors responsible for the audit engagement for Livent's financial year ended December 31, 1996, which was the financial year that preceded its failure. Students will be responsible for discussing the work performed by Deloitte & Touche and implementing audit procedures for complex transactions that the company has handled. The students must be capable of identifying the factors that may have impacted the audit and the engagement risk and will be asked to establish materiality. This case study is based on facts as related by the press and the various legal authorities who dealt with the affair.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.