Certified Public Accountants Certified Public Accountants are expected to perform at a higher level than most other members of society and are held to the highest ethical standards. The American Institute of Certified Public Accountants provides generally accepted auditing standards and the Code of Professional Conduct as a framework of guidance for accountants to follow in performing audit procedures. The following audit case demonstrates the potential problems that can occur when the client, Mattel, and the audit firm, Arthur Anderson, are both at fault. In 1945, Mattel Inc. was founded by Elliot and Ruth Handler and Harold Matson, who left shortly thereafter. the company for other job opportunities. Elliot Handler invented and produced toy products for Mattel while Ruth Handler oversaw and controlled the financial health of the company. Ten years after Mattel's introduction, his net worth increased to over $500,000. Ruth decided to launch advertisements on children's television networks. The costs for this project were high but the benefits far outweighed them. By 1971 the market value reached $300 million and "financial analysts recognized Mattel as one of the major growth companies in the United States" (4). The early 1970s also brought serious problems to Mattel. The company has hired Seymour Rosenberg as the company's executive vice president and chief financial officer. He wanted to make changes to the way Mattel operated, so Rosenberg chose to reorganize the company's structure by dividing operations into several business divisions. This process in turn increased operating costs. Rosenberg's investments and decision making were unsuccessful and he was fired by M... halfway through the job... fill the deal by charging an additional $4.4 million in expenses. Arthur Anderson neglected to ask what these expenses included and failed to examine and determine the exact amount of royalties owed to the inventor. Mattel miscalculated an insurance claim for a department store in Mexico that was destroyed by fire. The policy allows Mattel to earn up to $10 million as a result of losses and damages. This total amount was included in the financial statement for the fiscal year ending January 30, 1971. Both Mattel and Arthur Anderson should not have assumed that the entire amount would be recovered. “The federal agency argued that the method used by Mattel to calculate the amount reimbursable by the insurance company, a method approved by Arthur Anderson, was not credible” (10 ). Six years later, Mattel was awarded just $4.4 million for its insurance claim.