Question 5

The type of misconduct for audit firm would be held legally reponsible is

braeching the contract. Breaching contract may occur when there is non-performance

of contactual duty. Some cause for action agains the auditor for breaching the contract

include:

- Violating customer confidentially

- Failing to provide audit report in time

- Failing to discover material error or employee fraud

- Withdrawing from an audit engagement without notification

In this case Deloitte was resign from Medtrans company eventhough they did not

complete the current annual report.

Once an accountant has undertaken to serve a client, the employment and duty

as an accountant continues until ended by consent or request of the client or the

accountant withdraws from the employment, if it does not unduly jeopardize the

interest of the client, after giving the client notice and a reasonable opportunity to

employ another accountant or the matter for which the person was employed has been

concluded.

Deloitte have breach the contract with the Medtrans and didn’t show his

professional responsibility by resigning from be auditor for Medtrans. This accident

give big impact to the negotiation between Medtrans with William Blair & Company

who want to invest $10 million as a save man to Medtrans financial crisis.

Last but not least, Deloitte as auditor for Medtrans from 1988 to 1991 still

fail discover the material error. In the meeting between Ensz and Robert, Ensz

did not agree to the audit report because there are some matter who did not

properly enter to the journal of Medtrans.