Auditing and Assurance Services 9th Edition by Alvin Arens,Mark Beasley,Randy Elder

Exercise 8

Part II: Merry-Go-Round. Additional charges made against E Y included the following (recall that MGR hired E Y for turnaround consulting services):
• E Y had a close relationship with Rouse Co., one of MGR's primary landlords (E Y was soliciting business from Rouse and provided significant tax services).
• Swidler (the law firm that recommended E Y to MGR) and E Y had participated in at least 12 different business arrangements, some of which resulted in Swidler receiving significant fees from E Y.
• E Y did not disclose either of these relationships to MGR.
Required:
a. Do you think that E Y acted unethically, given that it had these relationships?
b. How could these relationships have affected E Y's advice to MGR? In other words, refer to the charges above and speculate as to whether any of the charges against E Y may have stemmed from the relationships described above.
To assist you in answering this question, consider the articles about MGR in footnote 10.