In April 2005 the SEC
announced that Deloitte & Touche had agreed to pay $50 mil-
lion to settle charges stemming from its audit of Adelphia Com- munications Corporation’s fiscal year 2000 financial statements. After performing appropriate research, address the following
questions.
a. Once the risks of material misstatement are identified, the audi- tor is to determine the audit approach that best addresses those risks. In what ways did Deloitte & Touche fail to do this?
b. What was the nature of the fraud at Adelphi as it related to debt obligations and its stockholders’ equity accounts?
c. In addition to paying the $50 million settlement, what other
actions did Deloitte & Touche agree to? Do you believe these actions will lead to improved audit quality at Deloitte & Touche?
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