...organisations has created the need for a specialist in various business controls: the internal auditor. We can understand better the nature of internal auditing today if we know something about the changing conditions in the past and the different needs these changes created. What is the earliest form of internal auditing and how did it come into existence? How has internal auditing responded to changing needs? As the operations of an organisation become more voluminous and complex, it is no longer practicable for the owner or top manager to have enough contact with all operations to satisfactorily review the effectiveness of performance. These responsibilities need to be delegated. The Development of the Profession of Internal Auditing Internal auditing has evolved from accounting-oriented to a management-oriented profession. At one time, internal auditing functioned as a junior to the independent accounting profession, and attesting to the accuracy of financial matters was the profession's main concern. Now internal auditing has established itself with a far broader focus. Modern internal auditing provides services that include the examination and appraisal of controls, performance, risk and governance throughout public and private entities. Financial matters represent only one aspect of the purview of internal auditing. Requirement to have Internal Audit Activity In January 2004, the US Securities and Exchange Commission (SEC) had approved new rules proposed...
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...company and audit client. But the threat of SPEs (special purpose entities) displays some manipulation from the part of the audit firm that also with prior knowledge of accounting ethics, which at most times makes it more risky, given the legal involvement. Lastly, manipulations are also likely to occur as the biggest threat in the audit consultancy services. So, professional ethics are likely to arise. Hence, self-governance is largely a matter that can pose greater risk. When it matters to preparation and retention of audit work paper, the requirement prepare by auditor should be in a manner that it helps the auditors to carry out auditing services in the most appropriate way. Hence the working paper requirement at most should avoid accumulating unnecessary working papers for the sake of client and for the requirement of professional auditing standards. When it comes to the ownership of audit work paper and as with the general principles, audit paper is the property of the auditor concerned in all circumstances. However, the auditor and the audit paper are also subject to some compliance. Hence, in the first instance audit firm own audit...
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...Finally, the last category is organizational architecture which explains how authority is distributed among Andersen’s employees, and how rewards determined. BUSINESS ENVIRONMENT TECHNOLOGY | MARKETS | REGULATIONS | Company started using computers for bookkeeping.Company developed the largest technology practice. | Arthur Andersen was well respected, reputable auditing company for many customers.Early 1950s Andersen entered in computer consulting business. | The federal law in 1930’s which required companies to provide their financial statements to an independent auditor each year helped Andersen’s grow. | STRATEGY Quality audits were valued more than higher short-run firm profits.“Four cornerstones” of good service, quality audits, well managed staff and profits.Auditors were rewarded and promoted for making sound audit decisions. Mid-level partner was making average $160,000 in today’s currency.In 1990s AA formulated a new strategy that focused on generating new business and cutting costs. It included how partners should empathize with clients. | ORANIZATIONAL ARCHITECTURE AA’s both business (auditing and consulting) had significant decision rights over its business. New “2X” performance evaluation...
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...auditor can help ensure that employees and members of management understand the environment in which the organization is operating (Louwers et al. 2007). The detective piece means that the auditor is making sure that clients are not trying fool the auditors or others through fraudulent reporting (Louwers et al. 2007). When company XYZ is looking to hire an internal auditor a number of factors should be considered so that the right person for the job and organization is hired. Management within Company XYZ will want to closely examine the company’s culture and hire a person that will align with the culture. Also the auditor should have the appropriate accounting, managerial, and industry background. I would like to recommend Sara Johnson for the newly created internal auditor position. Sara has over six year of auditing experience in the benefits management industry. Sara also has an extensive knowledge of computerized accounting and auditing record keeping systems. Sara ensures that she...
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...Journal Article Review Kas Internal Auditing (ACC 4012) Article: Code of Ethics for Internal Auditors Harmonized with the International Standards for Internal Audit Summary In the article titled “Code of ethics for internal auditors harmonized with the international standards for internal audit” by George Calota was published in 2008. The article was written to explain how Code of Ethics influences the roles of internal auditors when unified with the International Standards for Internal Audit. This study was carried out to allow both internal and external auditors, private and public business owners with an audit board, within their working environment to be aware of how an internal auditor is supposed to carry out their job and the polices which they should follow. The author’s main focus was on The Josephson American Ethics Institute ethical principles, Romania’s personal ethical principles and its similarities to the fundamental principles of the code of ethics and most of all, how the fundament principles of ethics and professional behaviors for internal auditors are harmonized with the international standards for auditing (Integrity, objectivity, confidentiality and competence). The author seemed to be highly qualified to tackle this particular issue. He is an experienced internal auditor, who has worked with the Ministry of Economy and Finance and also The Central unit for harmonizing the internal audit from Romania. Issues In the article, the author made mention...
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...EXECUTIVE SUMMARY This report is prepared to gain insights on the reasons for the collapse of Hastie Group Limited which is known as the top international designer, maintainer and installer of technical services to the infrastructure and building sector. Hastie has well established operations in Australia, the United Kingdom and the Middle East. The report begins with the introduction about the company and how and when it collapsed. The report further includes the major points extracted from the report issued by PPB Advisory, the administrators of Hastie Group. The major content of this report is focused towards the Auditing Issues within the Hastie Group that contributed towards its collapse. The Hastie group was audited by the Deloitte Touche Tohmatsu in 2011. The auditing issues mainly cover Auditor’s Breaches of duty and the potential claim against the auditors. Overall this report would help provide a better picture of the collapse of Hastie Group and the course of action followed. INTRODUCTION Hastie Group Ltd. is known as the top international designer, maintainer and installer of technical services to the building and infrastructure sector. Hastie Group has well established in Australia, the United Kingdom and the Middle East. In 1970, the Australian subsidiary of Hastie Group was formed in Sydney. The business quickly expanded into Perth and won prestigious contracts such as the Darling Harbour Exhibition Centre, Sydney Futures Exchange, Hyatt Hotel Canberra...
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...corporate culture where ethics are ignored? In recent years, greed, fraud, and a lack of ethical conduct have led to the collapse of many organizations. A variety of internal and external pressures can lead companies down the wrong path. And once the first misstep is taken, it’s a slippery slope to hurting stakeholders, the community, and your reputation. This turmoil and damage could have been avoided if organizations had chosen to maintain an ethical corporate environment, exercising integrity-rich behavior and ensuring the tone at the top was above reproach. This issue of Tone at the Top presents suggestions for creating and promoting an ethical corporate climate and the role internal auditors can play in helping ensure the environment supports ethical decisions and behavior. Code of Ethics It’s important to note that internal auditors adhere to their own Code of Ethics, which is included in The IIA’s International Professional Practices Framework (IPPF). The Code of Ethics mandates that internal auditors behave and practice with: n Integrity. n Objectivity. n Confidentiality. n Competency. It also delineates rules of conduct under each of the principles. A code of ethics is necessary and appropriate for the profession of internal auditing, founded as it is on the trust placed in its objective assurance about governance, risk management, and control. Ethical Values According to the Institute for Global Ethics (IGE), five ethical values exist in any human culture, regardless...
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...staffed both in terms of numbers as well as skill sets to discharge its functions effectively. The IIA Attribute Standards / and Performance Standards are very clear and definitive on this: i) Attribute Standard 1210 - Proficiency Internal auditors should possess the knowledge, skills and other competencies needed to perform their individual responsibilities. The internal audit activity collectively should possess or obtain the knowledge, skills and other competencies needed to perform its responsibilities. ii) Performance Standard 2030 - Resource Management The Chief Audit Executive should ensure that internal audit resources are appropriate, sufficient and effectively deployed to achieve the approved plan. Professionalism Internal auditing is grounded in professionalism and efficiency. Today's internal auditors are a far cry from the 'fault finders' or 'policeman' role that the profession has long been associated with. Modern day internal auditors are routinely consulted on all aspects of the organisation's activities from strategic planning issues to the standard day-to-day operational issues relating to the risk environment and internal control framework. They are continually on the lookout for emerging risks and changing risk profiles which may have an adverse impact on the organisation. They form the 'eyes' and 'ears' of Audit Committees who rely on their work before executing statements of internal control...
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...Table of Contents Introduction 2 Population 2 Economic Structure and Major Industries 2 Major Firms 4 China’s Stock Market 6 China Securities Regulatory Commission 7 Legal Enforcement of IFRS 8 Summary of contents of financial statements 9 Transition Process of Accounting Standards 10 Auditing Standards 11 Full convergence with International Standards 11 Verification of Capital Contribution 13 Comparison of China’s old GAAP and IFRS 14 Accounting Education in China 15 The Chinese Institute of Certified Public Accountants 15 The CICPA Overview 15 The CICPA Examination 16 Accounting Student 18 China’s Cultural Influences on Accounting 19 Appendix 1. Comparison of CASs and ISAs (As of 2006) 22 Appendix 2. Accounting Firms in China 24 Introduction Population In 2012, China's population amounts to 1.3 billion – an increase of 365 million since 1980. Yet, population is growing at a decelerating pace and should reach its peak in less than two decades. Current methods of population control will be relaxed as the growth of population slows. The fertility rate is presently 1.6 births per female (below replacement level) and is expected to remain at that level in the medium term. The median age is steadily rising and by 2011 it was 35.5years –16.9 years greater than the figure for 1980. In fact, population aging is occurring more quickly in China than in most other countries. The country's working age population will begin to fall by 2017...
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...riches but this is not the case of the Enron Corporation. Instead of becoming the nation’s greatest company, Enron instead laid claim to being the largest corporate bankruptcy in the history. The greediness and egotism wiped out the honesty and integrity that should instill on the persons who were involved in this case. Arthur Edward Andersen built his firm, Arthur Andersen & Company, into one of the largest and most respected accounting firms in the world through his reputation for honesty and integrity. His motto was “Think straight, talk straight” and he insisted that his clients adopt that same attitude when preparing and issuing their periodic financial statements. Arthur Andersen’s auditing philosophy was not rule-based; instead he invoked a substance-over-form approach to auditing and accounting issues. He avidly believed that the primary role of the auditor was to ensure that clients reported fully and honestly to the public, regardless of the consequences for those clients. Ironically, Arthur Andersen & Co.’s dramatic fall from eminence resulted from its association with a client known for aggressive and innovative uses of “accounting gimmicks” to window dress its financial statements. Enron Corporation was the second largest client of the firm and was involved in large, complex transactions with hundreds of special purpose entities (SPEs) that it used to obscure its true financial condition and operating results. Among other uses, these SPEs allowed Enron to...
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...Brief on an Internal Auditor Recommendation Robin Block ACC/544 July 2, 2012 Brief on an Internal Auditor Recommendation An internal auditor can be beneficial to help alleviate the challenges being experienced in your company with internal controls and accounting functions. Internal auditing can provide added value and improve your company’s operations (The Institute of Internal Auditors, 2012). By hiring an internal auditor your company can maintain effective internal controls and reduce business risks (Lehman Brown, 2009). Benefits Your company can enjoy the benefits of having an in house auditor. An internal auditor will be familiar with the culture and direction of the company allowing the auditor to have some foresight in risks that could come. The Internal auditor will work independent from any management within the company, to ascertain the risks, evaluate the risks and report a recommended procedure or policy to mitigate any risk. ” Internal auditors make recommendations that result in additional profits or cost savings for their companies” (Louwers, Ramsay, Sinason and Strawser, 2007, p. 628). The auditor can conduct a number of different audits which can be an advantage the company. A compliancy audit of the HR department can reveal if the company is in compliance with Federal and State labor laws and fair hiring practices. An operational audit can help management understand and execute responsibilities more affectively and improve profitability...
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...Central Texas Professor: Marshell J. Silva Ethics Auditing Ethics auditing by definition, an ethics audit is a “systematic evaluation of an organization’s ethics program and/or performance to determine its effectiveness.” This concept of ethics auditing is fairly new and few companies have conducted an ethics audit. However, performing such audits will likely become more mainstream as recent legislation encourages greater ethical accountability for companies to demonstrate they are abiding by the law and have established programs to improve their ethical decision making. The U.S. Sentencing Commission (the “Commission) has amended the Federal Sentencing Guidelines for Organizations (“FSGO”) whereby an effective compliance and ethics program must “exercise due diligence to prevent, detect, and report criminal conduct and otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with all applicable law." The Commission noted there are seven minimum requirements of an effective ethics program, standards and procedures to prevent and detect criminal conduct; Responsibility at all levels of the program, together with adequate program resources and authority for its managers; Due diligence in hiring and assigning personnel to positions with substantial authority; Communicating standards and procedures, including a specific requirement for training at all levels; Monitoring, auditing, and non-retaliatory internal guidance/reporting...
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...Shiqi Wang ACCT 4456 Professor Steve Jensen September 22, 2015 WorldCom Case Analysis According to the section 301.4 of Sarbanes-Oxley Act of 2002, each audit committee shall establish procedures for complaints regarding accounting, internal accounting control, and auditing matters, and the anonymous complaints regarding questionable accounting or auditing matters. However, in this case, the WorldCom Company did not have the procedures for anonymous complaints, so Cynthia Cooper decided to go over Sullivan’s head and reported her findings to the audit committee. This was a huge gamble for her and was risking her career. Section 406 of the Sarbanes-Oxley Act of 2002 requires the disclosure of the code of ethics for senior financial officers. The commission shall issue rule to adopt a code of ethics, and if not, reasons must be disclosed. Also, section 406 defines “code of ethics” and requires the commission to disclose its changes of the code of ethics. The Sarbanes-Oxley Act was developed after a series of financial fraud events to prevent fraud incidences. In my opinion, Sarbanes-Oxley Act has an effect in preventing fraud incidences from occurring. First, it gains people’s awareness of ethical issues and consequences they will face in a company when they are in an ethical dilemma. Thus, the act provides a guide for the direction of managers’ behavior. Second, not only in the WorldCom case, but also in other financial fraud events that occurred during 2001 and 2002,...
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...organization's members. B. The organization's structure. C. The organization's environment. D. The organization's technology. Answer (C) is correct. REQUIRED: The factor management is least likely to be able to change. DISCUSSION: The environment of an organization consists of external forces outside its direct control that may affect its performance. These forces include competitors, suppliers, customers, regulators, climate, culture, pol technological change, and many other factors. The members are a factor that managers are clearly Answe~(A) is incorrect. factor that managers are incorrect. The organiz I are clearly able to change. organization's technology' able to change. 2. Lack of skills, threats to job status or security, and fear of failure all have been identified as reasons that employees often A. Want to change the culture of their organization. B. Are dissatisfied with the structure of their organization. . C. Are unable to perform their jobs. D. Resist organizational change. Lack of skills, threats to job status or re inhibit changes in the culture of the (8) is incorrect. Lack of skills, threats to job status . rity, and fear of failure are not symptoms of dissatistacjion with the structure of the organization. Answer (C) is iORprret1. Lack of skills, threats to job status or security, and featot failure do not indicate an inability to perform. . ~.,:,~. A. B. C. D. \~~ nswer (A) is correct. REQUIRED: The true statement about resistance to organizational change...
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...function of the PCAOB and AS 5 and AS 11 Ramecha Davis This paper is submitted in partial fulfillment of the requirements for Auditing BUS5423 Section 70 Texas Woman’s University Dr. John Nugent April 20, 2015 Abstract The purpose of this research paper is to provide an in depth review of the Public Company Accounting Oversight Board (PCAOB) and how it contributes to the interest of the Sarbanes Oxley Act of 2002. The research highlights the importance of the PCAOB’s role in the accounting profession as well as prospective changes that may evolve in the future related to PCAOB. Upon reading this research the reader will be familiar with PCAOB’s roles and functions, as well as auditing standards (AS) released such as AS5 and AS11. The PCAOB’s significance in the protection of investors is revealed as well. Keywords: SEC, PCAOB, SOX, AS 5, AS 11, Internal Control, Materiality Table of Contents Introduction……………………………………………………………………………………………….5 PCAOB…………….……………………………………..……………………………….……….……5-6 a) The PCAOB Mission, Vision, & Core Values………………………………….………........6-7 b) Current Standards…………………………………………………………….…..............…7-8 c) Future Standard Plans…………………………………………………………………….…8-9 Sarbanes Oxley Act of 2002 Section 404……………………………………………………………...….9 a) Auditing Standard 5…………………………………………………………………….….9-10 b) Auditing Standard 11……………………………………………………………………..10-12 c) Communication Requirements..............................................
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