Case 4.3 The Baptist Foundation of Arizona: The Whistleblower Hotline Consult Paragraph 5 of PCAOB Auditing Standard No. 10. Do you believe the Arthur Andersen auditors responded appropriately to the information received from BFA\'s former accountant, Karen Paetz? Why or why not? Solution Answer: Arthur Andersen auditors did not at all responded appropriately to the information received from BFA\'s former accountant, Karen Paetz! Beacuse, it is the fundamental duty of an auditor to bring all such concerns to the audit committee. It is unusual and unethical on the part of Andersen that he chose to completely ignore this individual’s warning. Karen Paetz was employed by BFA for 7 years. Infact, she was a credible individual with a lot of knowledge of the accounting infrastructure at BFA. During Paetz’s employment at BFA, she interacted frequently with Arthur Andersen’s auditors on each audit engagement. The fact that she first resigned and then set up a lunch meeting with McGrath to voice her concerns ALO’s deficit (in excess of $100 million) and ALO’s monthly losses (approximately $2.5 million) underscored the importance of taking her concerns seriously. .

1. Case 4.3
The Baptist Foundation of Arizona: The Whistleblower Hotline
Consult Paragraph 5 of PCAOB Auditing Standard No. 10. Do you believe the Arthur Andersen
auditors responded appropriately to the information received from BFA's former accountant,
Karen Paetz? Why or why not?
Solution
Answer:
Arthur Andersen auditors did not at all responded appropriately to the information received from
BFA's former accountant, Karen Paetz!
Beacuse, it is the fundamental duty of an auditor to bring all such concerns to the audit
committee. It is unusual and unethical on the part of Andersen that he chose to completely ignore
this individual’s warning.
Karen Paetz was employed by BFA for 7 years. Infact, she was a credible individual with a lot of
knowledge of the accounting infrastructure at BFA. During Paetz’s employment at BFA, she
interacted frequently with Arthur Andersen’s auditors on each audit engagement. The fact
that she first resigned and then set up a lunch meeting with McGrath to voice her concerns
ALO’s deficit (in excess of $100 million) and ALO’s monthly losses (approximately
$2.5 million) underscored the importance of taking her concerns seriously.