Andy Auditor, the audit partner in charge of the audit of Infinity’s 20X0 consolidated financial statements, was somewhat puzzled as to why there

Andy Auditor, the audit partner in charge of the audit of Infinity’s 20X0 consolidated financial statements, was somewhat puzzled as to why there were so many limited partnerships, since only one development project was being undertaken. However, he was assured by Infinity’s CFO that the structure was appropriate and in accordance with GAAP because, in her words, “It was all set up by financial engineers with PhD’s in ZZ’s consulting group. These people know all about GAAP and are much smarter that you are, Andy, so there is nothing to be concerned about.” As a result of his audit work, Andy provided a clean audit opinion on Infinity’s 20X0 consolidated financial statements. During 20X1, adverse events resulted in Infinity’s being unable to meet its obligations under the loan guarantees and it went bankrupt.