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Source: Knapp, Michael C. (2001) Contemporary Auditing, Real Issues & Cases 4th Ed. Belmont: Southwestern-Thompson Learning. J.B. HANAUER CO. & Pick up the financial statements of a brokerage firm and you wiIl . h d a balance sheet quite different from the typical corporate balance sheet.: Take Quick & Rrilly, for example, a large discount broker. In a recent balance sheet, Quick & Reilly reported total assets of almost 52.3 billion. Receivables from customers and other brokerage firms accounted for approximately 95 percent ot those assets. L~kewise, snort-term payables tend to dominate the Liabilip side of a brokerage 5rm's balance sheet. Quick k Rrilly reported 52.3 billion of liabilities. 94 percent of which involved debts to customers and other brokerage firms. Clearly, confirmation procedures for receivables and payables are important audit tests applied to brokerage cfients. So it was in the late 1970s and early 1980s for the annual audits of J.B. Hanauer & Co., a brokerage firm headquartered in New Jersey that had several branch offices in south Florida. Stanley Goldberg supervised the annual audits of J.B. Hanauer & Co. for several years. During his career, Goldberg served as a partner with three different public accounting firms: J.K. Lasser & Co., Touche Ross & Co., and Richard A. Eisner & Co. Goldberg became a parmer of Touche Ross following a merger between that firm and J.K. Lasser. When Goldberg left Touche Ross to join Eisner, Hanauer's executives wanted Goldberg to continue supervising their annual audits. As a result, in 1980 these executives dismissed Touche Ross and retained the Eisner firm. Hanauer's fiscal vear ended on hiarch 31. Two to three months prior to that date, Goldberg sent a Genior and two or more staff accountants to Hanauer's offices to i. Tnls case was developed primad? h r n the iollowlng source: Securities and Exchange

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