The expectations gap occurs because many investors and policy makers expect auditors to detect all fraud, and if they do not, the auditors are presumed to be at fault." (Apostolou and Crumbley, 2008)
The specific requirements of auditors are included in SAS 99 AU 31 and IAS 240 and in summary includes the following requirements: (1) Considering a company's internal controls and procedures, and how these are actually implemented, when planning the audit; (2) Designing and conducting audit procedures to respond to the risk that management could override internal controls and procedures; (3) Identifying specific risks where fraud may occur; (4) Considering whether any misstatement uncovered during the audit may be indicative of fraud; (5) Obtaining fraud-related written representations from management; and (6 Communicating with appropriate managers and the board if the auditor finds an indication that fraud may have occurred. (Apostolou and Crumbley, 2008)
VI. FRAUD TRIANGLE
The fraud triangle is comprised by the: (1) incentive or pressure in that management or other employees may have an incentive or be under pressure providing a motivation to commit fraud; (2) opportunity in that circumstances exist that provide an opportunity for fraud to be perpetrated; (3) rationalization in that those involved in fraud are able to rationalize a fraudulent act as being consistent with their personal code of ethics. (Ramos, 2003b) There are stated to be individuals in possession of an "attitude, character or set of ethical values that allows them to knowingly and intentionally commit a dishonest act." (Ramos, 2003b)
VII. AICPA ETHICS GUIDANCE FOR AUDITORS
AICPA ethics for auditors is comprised of rules concerning the integrity and objectivity of auditors as well as the obligations of the auditor to their employer's external accountant and other additional ethics considerations. The AICPA .01 Rule 102 'Integrity and Objectivity' states that the auditor shall "in the performance...
Audit Quality and Agency Cost Since the advent of industrialization, there has been the presence of a bond between the people who invest and the people who manage those investments, forming a vital relationship amongst the two groups. Although with the rise of such relationships, the soaring issues of trust and confidence have been a hindrance in economic growth. Viewing the high percentage of the capital of investors or shareholders in
Sarbanes-Oxley Act of 2002 in reducing fraudulent financial reporting Introduction to Fraudulent Financial Reporting Available research on financial statement fraud relies mostly on anecdotal evidence (for example, Wells, 2001, 2002, 2004a, and 2004b; Rezaee, 2003). This evidence offers advice on how mechanisms related to the fraud triangle can be curtailed. It leads to theoretical sense to reduce factors which lead to more instances of fraud. However, deterrence and established deterrence methods
Ethics and Regulatory Issues Related party transactions reported on by Arthur Andersen & Co. Flaw in the accounting firm's logic Checklist for special projects performed by external auditors Checklist Proposed rules or laws to prevent similar occurrences Enron was one of the Wall Street's favorite blue chip stocks before an accounting scandal of the firm surfaced in 2000. The revelation that company has been misreporting its profits and losses during 1990s crashed the company's stock. The
conception that is laid behind write-down of inventory is that the amount value of the inventory being considered can still appear in the financial statements only if the inventory still has some worth or value. This particular amount value is attained by getting the difference between the original costs of the inventory as the prevailing market replacement value. In accordance to IAS 2, if the loss on write-down of
IT Fraud Evaluate the factors that add to corporate fraud The business fraud can be credited to conditions emerging from deceptive monetary reporting and misappropriation of possessions. These conditions are 3 and all 3 features of the fraud triangle have to exist for fraud to take place. Management or staff members have to have the reward or pressure to dedicate fraud, see the opportunity emerge and have the ability to justify the
The forensic accounting done on Koss reveals the importance for a business's auditing firm's responsibilities. It also shows that an auditing firm is liable to face legal charges for failing to find a fraud in their accounting activities in a business. The forensic accounting carried out on Koss revealed that the Vice President Sujata and the former Senior Accountant, Julie Mulvane, engaged in a range of accounting fraud cover ups
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