Auditing and Accounting Cases 4th Edition by Deborah Freier,Jay Thibodeau

Exercise 5

Consult Paragraphs 1-2 of Ethics Rule 102 (ET 102). Next, consider the role of the Enron employee who was responsible for applying MTM accounting rules to electric power contracts, like the Eli Lilly contract. Assuming the employee was a CPA and knew that the use of MTM accounting was beyond the scope of the SEC approval parameters, do you believe that the employee had a responsibility to report the behavior to the audit committee? Why or why not?