...I. Executive Summary Flat Cargo Berhad (FCB) is a listed company that provides air cargo carrying services within the Asian region. The company owns five fully owned subsidiaries and the major shareholders of this company is Bangor Berhad. The company’s external auditor is Kencana & Associates where the audit team is led by Mr Chuah Mun Soong. On 5th February 2006, Mr Chuah has been informed by his team that there are some inconsistencies in the accounts of FCB. Therefore he has decided to do his own investigation on the company to determine is there any fraud involved before he can report the situation the managing partner of Kencana & Associates, Mr Keong Chee Wah. II. Statement of the Problem One of the issues faced by the company is the inconsistencies in the company’s accounts where they were unable to verify the aircraft that they claim have purchased in the year 2005. The auditor also found a non-functional aircraft in the hangar that does not worth much. It can be said the cause of this problem would the weakness in assets management or internal control system as well as the weakness in the accounting department where the management of the company is able to make false claims. The second issue faced is poor debt management where a lot of debt confirmation letters that were sent was returned due to the changes in debtors addresses. This can be only explained by the company’s weakness in keeping proper records of their debtors as well as their ability...
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...REPORT RE: RECENT ACCOUNTING AND CORPORATE GOVERNANCE SCANDALS Contents INTRODUCTION: 3 CORPORATE GOVERNANCE 5 CORPORATE GOVERNANCE IN IRELAND 5 RESPONSE FROM REGULATORS TO THE MOST RECENT SCANDALS IN BANKING SECTOR 7 US CORPORATE GOVERNANCE at a time of Tyco scandal 8 RESPONSE FROM THE REGULATORS -SARBANES-OXLEY ACT 2002 9 AUDIT 10 EXTERNAL AUDIT 10 INTERNAL AUDIT 11 INTRODUCTION TO ANGLO IRISH BANK 12 The Scandals 12 Loans to Sean Fitzpatrick 13 Irish Life and Permanent Depositing Funds 14 Corporate Governance Situation of Anglo 16 Ernst & Young – External Auditor 17 Impact on Shareholders & The Public 18 Company Law, Financial Regulator, Accounting Standards IFRS and GAAP 19 TYCO INTERNATIONAL 20 DETAILS OF TYCO’S SCANDAL 21 ACCOUNTING ISSUES IDENTIFIED 22 THE CORPORATE GOVERNANCE WEAKNESSES AT TYCO 22 PERFORMANCE OF EXTERNAL AUDITORS 23 CONCLUSION 27 The Main Reasons for The Scandals 27 Steps taken afterwards-will they prevent similar events happening in the future? 33 END REFLECTION 36 Bibliography: 37 Appendices: 41 INTRODUCTION: Accounting and corporate governance scandals have been a growing problem in the recent years. Many believe that the blame for those scandals should be borne on two groups of people. Those responsible for managing a company and those whose duty is to provide assurance on the accounts prepared by the directors (auditors), both of whom failed to perform their jobs adequately...
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...CPA Program The Practical Experience Guide EVE CHENG CPA SENIOR ANALYST BHP BILLITON Contents Practical experience requirement How to identify if your role is relevant Where do you fit? What skills areas do you need to demonstrate? Your mentoring relationship How to record your experience in the logbook The skills guide Personal effectiveness skills Leadership skills Business skills Technical skills 3 4 6 7 8 10 11 12 13 14 15 MICHELLE ROACH CPA 2 Practical experience requirement Did you know? Our studies show that members consistently perform better in their segments when they are enrolled in the practical experience requirement The practical experience requirement of the CPA Program gives you the opportunity to use the knowledge and skills gained in your education and apply them in your workplace. Combining your education with mentored practical experience will give you the opportunity to develop and demonstrate highly sought after technical and soft-skills that will benefit your entire career. Starting your practical experience requirement means that you are one step closer to your goal of becoming a CPA. CPA Australia recommends that you start the practical experience requirement and the professional level segments at the same time, if you are employed in a relevant role. What are the requirements? • complete a minimum of three years of relevant full-time or equivalent part-time work experience • demonstrate competence in 16 personal effectiveness...
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...CHAPTER 3 Auditors’ Ethical and Legal Responsibilities SOLUTIONS FOR REVIEW CHECKPOINTS 3.1 This arises from the three party accountability discussed in chapter 1. The auditor is hired because users expect there may be such a conflict. If users completely trusted management there would be no need to have an auditor. This is the only way to detect fraudulent or misleading reporting. The logic is to reduce this potential to an acceptable level of risk. If the auditor assumed this risk was zero to start with the auditor would not need to provide evidence that the possibility is low, and that contradicts the reason users demand an audit. 3-2 No, the auditor cannot detect deception without being skeptical. A non-skeptical auditor on finding evidence of fraud may not treat it with the significance it deserves. The rule that suspicious transactions or evidence of management deceit should automatically be considered material, even when the absolute amounts involved may be very small or insignificant, is an example of skeptical logic in action. Since three party accountability implies some degree of mistrust of management by users, the auditor must incorporate skepticism in his or her reasoning process when management makes assertions about the financial statements it has prepared. 3-3 A professional accountant must be prepared to be agent, spectator, advisor, instructor, judge, critic. 3-4 Apparently, in ethical philosophy, the word "conscience" is used...
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...Reserve Fund Mesopotamia Luca Pacioli Provident Fund Depreciati Income & Expenditure Credit TM AccountAble Handbook Budget & Balance Report vFkZ'kkL= Corpus Voucher NGO Fixed Assets Register Grants Accounting Standards Narration Receipts and Revenue Stamps Benedetto Cotrugli Ledgers Regulation Cash Box Revolving Funds Accounting Multiple Cash Books Trial Balance Auditors Computerized Accounts Deficit Endowments Investments Journal Honorarium Form IIIA Bank Reconciliation Account Payee, Not Negotiable ction 10(23C)(iv) Blank Cheque Tax Exemption vkpk;Z dkSfVY; Key Persons ACCOUNTABILITY Contribution in Kind INCOME Transparency Public Disclosure Auditors’ Certificate Debit Stock Register Receipts & Payments Societies Registration Act, 1860 Public Trust TM AccountAid India Section 25 Non-profit Company Section 80G New Delhi Donation Ear-marked Funds Salary Register izfrxzkgdSÜpk;a Gratuity Conflict of Interest About this book (front inside cover) The AccountAble Handbook is a compilation of the individual issues of ‘AccountAble’, released by AccountAid India since 1994. These issues have been designed and circulated on a monthly basis primarily for the partners of our client Agencies. ‘AccountAble’ is circulated to about 1,200 persons, including Chartered Accountants. It is also available through e-mail, on a complimentary basis. The present compilation brings all issues of AccountAble...
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...1- What are the pressures that lead executives and managers to “cook the books?” In the 1990s, the telecommunication was rapidly growing which led WorldCom to adopt the strategy of purchasing small long distance firms with limited geographic service areas and consolidating carriers with large market shares. This was the company’s main key profit. Indeed, by adopting this strategy, WorldCom grew quickly by expanding internationally in South America, West America, Europe and Latin America. As a result of this, WorldCom became the leader in this industry. - The pressure that Ebbers put on his employees as he wanted by the number one stock in Wall Street by increasing the revenue. He demanded his employees to increase the revenues even if the long-term cost exceeds the short-term profit. As a result of this demand by Ebbers, executives and managers needed to show increasing in the revenues that they started cooking the books. - In July 2000, the U.S. Justice Department didn't allow WorldCom to merge with Sprint. Due to the refusal, the company was shocked and faced difficulties to find its way out. - Also, in 2000, the telecommunication industry began to fall apart as a result of the high competition along with the low demand. As new entrants began to enter the market, this led the prices to decrease further. Due to this, WorldCom faced a higher pressure to increase its revenues. Also. WorldCom struggled to maintain the same level of E/R ratio. - Moreover, WorldCom was faced...
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...the need to invest in a large capital investment of setting up a department to undertake those activities. Establishing and maintaining a department can be a challenging and daunting task for a company. Effective internal audit functions require a diversity of skills that many organizations find difficult to source and retain. Significant investment is required in recruiting, training, and developing professional internal auditors to be equipped with the latest methodology, technology, and time and resource management. By opting for outsourcing, management can hire fully dedicated internal audit professionals without the day-to-day managerial requirements that an in-house internal audit department would require. The outsourcing arrangements take many forms, from limited assistance to the internal auditors with assignment in which they lack expertise to providing all the internal audit work. WHY OUTSOURCING? Many organizations, particularly small organizations, are currently considering the outsourcing alternative as an appropriate measure where there is scarcity or unavailability of internal audit resources. The temporary or permanent outsourcing solution may be necessary to acquire timely, professional internal audit services and competent internal audit staff. Temporary staff shortage, the need for special skills especially on special projects, remote geographical business locations, and additional staff to meet deadlines will demand management to resort to the outsourcing...
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...Quality Audit Project No.: 2 Student Name: Sonia Rana Name : Sonia Rana List of Contents Description Page No. Introduction Quality Audit and Its Importance Audit Team and Their Roles Audit Procedure Entry and Exit Meetings Reporting Audit Standards Summary References 3 4-5 5-7 8-11 11-13 13-14 14-15 15 15 Page 2 of 15 Name : Sonia Rana Introduction: This paper details the importance of the Quality audit, why audit are conducted and what is the purpose of auditing. It explains the process followed to organise, complete and report the audit. Also roles of the various audit team members including external experts/technical specialists are discussed. A brief overview of the audit process, what process and techniques are used during audit process. It also includes the importance of the entry and exit meetings, why these meetings are required and what is discussed in these meetings. This paper explores about the legislations, codes of practices and quality standards that applies to a Quality auditing. Also identifies what reports needs to be made as a result of audit findings, also discusses the formats of the reports and to whom these reports should be presented. A brief conclusion is presented in the last section summarising the findings and discussions. Quality Audits and Its Importance: Page 3 of 15 Name : Sonia Rana Quality audit is the process of systematic examination of a quality system carried out by an internal or external quality auditor or an audit team. It...
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...Freddie Mac Accounting Scandal On January 22, 2003, Freddie Mac, a government-sponsored enterprise created to expand the secondary mortgage market in the USA, announced to the public that its financial results for the past three years will be restated. These restatements were called upon by the revaluation of certain accounting policies previously used by management in conjunction with audit firm, Arthur Andersen. The restatement saw a cumulative increase in the retained earnings of the firm totaling $5 billion dollars, and regulatory core capital also increase by $5.2 billion dollars. This announcement came after an extensive investigation of the company by the OFHEO (Office of Federal Housing Enterprise Oversight) in collaboration with the SEC and PricewaterhouseCoopers, which was the audit firm during 2003. This investigation was initiated in June 2003 after the retirement of former Board Chairman and CEO Leland Brendsel, the termination of former president and COO David Glenn, and the resignation of former Executive VP – CFO Vaughn Clarke. Throughout the course of the investigation the full extent of the fraud was uncovered and fines totaling $125 million dollars were issued. The following report outlines the incentive management had in perpetrating fraud, the methods in which it was perpetrated, as well as how it went on so long without being unveiled. Why Did They Do It? Throughout the 1990s, Freddie Mac promoted itself to stakeholders as a company with steady growing...
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...employed Cik Amy, a fresh graduate from local university since April 2006 and had no working experience to be their Finance Executive. At the same time, the company had secured a contract worth RM 750,000 to be implemented over a durations of six months. In order to secure the contract, Encik Zayed had applied for banking facilities due to the company’s shortage of funds, which required the Audited Financial Statements had to be issued to the bank at least by September 2006. Cik Amy was assigned to analyze and provide the Auditors with the necessary clarification and documentation, as Delima Enterprise Sdn Bhd (DEBS) had not performed the statutory audit. It was July, 2006 when Encik Zayed engaged the external Auditor Aziz & Co, introduced by his friend to perform the statutory audit for the period of 2003 to 2006. That was the first audit experience for the couples and it was a difficult learning experience. The Auditors expressed their intention to qualify the Financial Statements due to several unresolved issues. However, Encik Zayed and Puan Hashimah tried to negotiate with the Auditor to not qualify the Financial Statements, failing which Encik...
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...Course Schedule Course Modules Review and Practice Exam Preparation Module 1: Conceptual issues in assurance Overview This module builds on the fundamental concepts of auditing and other assurance services introduced in your prerequisite auditing course. It begins with an overview of the key drivers in the demand for audits, and then surveys current challenges and issues such as the audit and regulatory environment and the expectation gap. You will also study issues related to the economics of auditing and their impact on auditor motivation and standard-setting; in the process, you will consider different perspectives on protecting the public interest and the public accountant’s role in helping to advance the profession. The various topics integrate information sources related to research in the field and readings from the Ethics Readings Handbook (ERH) , drawing on concepts from your prerequisite accounting theory course. In AU2 , you will study a wide variety of technical, practical, and theoretical material. This module lays the foundation for exploring some of the more difficult areas of professional judgment you will encounter as you progress through the course. When faced with issues that challenge your professional judgment, you are encouraged to think back to the concepts studied in this module to help frame your decision making. Please be sure that you have purchased the CPA Canada Handbook, CGA Student Edition mentioned in the course introduction, as it is required...
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...Lecture 1 Chapter 1- Demand for audit and assurance services. Assurance services * Independent professional services that improve the quality of information for decision makers. 1. Attestation services * A type of assurance services in which the public accounting firm issues a written communication that express a conclusion about the liability of a written assertion of another party. * Three categories of Attestation services: a. Audit historical financial statements A form of attestation services in which the auditor issues a written report expressing an opinion about whether the financial statement are in material conformity which accounting standard. b. Review of financial statement: A type of attestation service performed by public accountants. Many entities want to provide assurance on their financial statement, without incurring the cost of an audit. c. Other attestation services Such as a natural extension of audit of historical financial statement, as users seek independent assurance about other types of information. For example: banks often require debtors to engage public accountants to provide assurance about the debtor’s compliance with certain financial covenant provision stated in the loan agreement. 2. Other assurance services, They are similar to attestation services in that public accountant must be independent and must provide assurance about information used by decision maker, but differ in that the public...
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...Course Schedule Course Modules Review and Practice Exam Preparation Resources Module 1: Conceptual issues in assurance Overview This module builds on the fundamental concepts of auditing and other assurance services introduced in your prerequisite auditing course. It begins with an overview of the key drivers in the demand for audits, and then surveys current challenges and issues such as the audit and regulatory environment and the expectation gap. You will also study issues related to the economics of auditing and their impact on auditor motivation and standard-setting; in the process, you will consider different perspectives on protecting the public interest and the public accountant’s role in helping to advance the profession. The various topics integrate information sources related to research in the field and readings from the Ethics Readings Handbook (ERH) , drawing on concepts from your prerequisite accounting theory course. In AU2 , you will study a wide variety of technical, practical, and theoretical material. This module lays the foundation for exploring some of the more difficult areas of professional judgment you will encounter as you progress through the course. When faced with issues that challenge your professional judgment, you are encouraged to think back to the concepts studied in this module to help frame your decision making. Please be sure that you have purchased the CPA Canada Handbook, CGA Student Edition mentioned in the course introduction...
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...Executive summery As professionals, certified public accountants perform an essential role in society. Consistent with that role, members of the Society of Certified Public Accountants have responsibilities to all those who use their professional services. Members also have a continuing responsibility to cooperate with each other to improve the art of accounting, maintain the public's confidence, and carry out the profession's special responsibilities for self-governance. We worked in this paper about the ethical dilemmas using an ethical framework, the AICPA code of rules and interpretation on independence and it’s importance and the requirements of other rules under the AICPA. We found that in some cases the rules of conduct is applied accurately and in other situations violation of code of conduct, rules of conduct is existed. Ethics in professional accountancy are of utmost importance. Now as the business and financial world is adopting international accounting and auditing standards, it is becoming all the more necessary to adhere to certain Code of Ethics prescribed by international and national accountancy bodies. Accountants practicing in all segments of accounting need to understand both the relevant ethical standards of accounting and the mechanisms for enforcing these ethical standards. Further, accountants need to have an understanding of how to apply these standards in practical situations. In 1988, the AICPA restructured the profession's Code of Conduct...
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...organization to keep track of assets and measure profits and losses. Control procedures are designed to ensure that the business’s goals are achieved. Risk assessment is an assessment that help the company identify its amount of risk. All companies need internal control procedures. Companies should employ employees that are competent, reliable, and ethical. A business with good internal controls should never overlook important duties. All employees should have certain responsibilities and understand those responsibilities. There should also be separation of duties, this will limit fraud and promote accuracy of the accounting records. No one person should be responsible for every aspect of a job. This will cause mistakes to happen. Audits are also a very important internal control procedure so are documents, and electronic devices. What is The Sarbanes-Oxley Act? The Sarbanes-Oxley Act was passed by congress in 2002 with the aim of preventing an assortment of ills related to corporate finance and reporting. The Enron and WorldCom scandals had a great deal to do with The...
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