DHB Industries Critique Afua Nyamekye Liberty University DHB Industries Critique 1. Exhibits 1 and 4 present DHB’s original 2003-2004 balance sheets and income statements and the restated balance sheets and income statements for these two-year, respectively. Review the original and restated financial statements for 2004 and identify the “material” differences between them. I agree to the material differences that Brittani pointed out. Materiality depends on a lot of factors. Ruhnke and Schmidt (2014) states that “when determining materiality, auditors must consider both qualitative and quantitative factors” (p. 249). In the case of DBH, the materiality of the two years can be both quantitative and …show more content…
This statement is an understatement considering the number of times auditors were fired by DHB. • Managers and employees tend to be evasive when responding to auditors inquires. 3. During the 2004 DHB audit, the company’s independent auditors had considerable difficulty obtaining reliable audit evidence regarding the $7 million of obsolete vest components that allegedly had been destroyed by a hurricane. What responsibility do auditors have when the client cannot provide the evidence they need to complete one or more audit tests or procedures? I do not agree to the fact that auditors should resign if the necessary information is not possible to obtain. The auditor should do their own investigations to the the response that they are getting from management about the where about of the documents. I also believe that the audit committee is there to help solve of these issues. Another thing that can be done is to give the market value to the products that has been destroyed and be included in the disclosure. 4. What responsibility, if any, do auditors have to search for related-party transactions? If auditors discover that a client has engaged in related party transactions, what audit procedures should be applied to …show more content…
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
The specific obligations in this case would include monitor corporate governance activities and compliance with organization policies, and assess audit committee effectiveness and compliance with regulations
Auditors do not provide audit opinions for different levels of assurance. Therefore, auditors consider providing more or less assurance when modifying evidence for engagement risk to be unnecessary. However, auditors should be professionally responsible to accumulate additional evidence, assign more experienced personnel, and review the audit more thoroughly, particularly when a client poses a higher than normal degree of engagement risk. The auditor should also modify evidence for engagement risk when high legal exposure and other potential actions affecting the auditor
Though Minkow should have been the expected businessman of integrity, auditors cannot allow themselves to be blindsided and must focus on their specific tasks necessary of all audits. The auditors should have been thorough and required complete cooperation with their review of his records. If the auditors had maintained their role, Minkow may have been caught sooner as financial statements would not have been able to be reconciled. Also, if the auditors required Minkow to provide more information, he may have become defensive at some point or quickly prepared items to satisfy the requests, which in turn may not make sense. It is necessary to add that even if the auditors did complete a substantial amount of the audit utilizing their normal procedures, Minkow may have been just that good that he was able to manipulate most everything.
In addition to learning these four improper practices, as a plaintiff, if he or she intends to file a legal action against audit firms, evidences to charge them have to be sufficient. PwC’s auditors might be reckless, but they were not added as defendants. Most of the charges to Campbell were rejected by the judge just because plaintiffs could not provide sufficient evidence and specifically point out facts. Also, this case shows us a red flag about unusual increasing sales near the end of accounting period.
The auditors in the ZZZZ Best case should be held liable for failing to uncover the fraud. It is the auditors responsibility to exercise due care and to investigate any red flags found during the audit process. AS 12 requires auditors to identify and assess risks to material misstatements. An examination of ZZZZ Bests internal controls should have exposed weaknesses that would have instituted further investigations. AS 15 requires the auditor to obtain sufficient audit evidence. In the ZZZZ Best case, the sole practitioner auditor relied solely on forged paperwork. If the auditor had ever visited an insurance restoration site it would have become obvious that the setup was a fraud. Even though ZZZZ Best was clearly engaged in illegal
The audit committee a part of the board of directors plays an important role in preventing fraud. They are directly responsible for overseeing the work of any public accounting firm, such as PwC, employed by the company. They also must preapprove all audit services provided by the auditors.
To better observe the actions of public accountancy, SOX has established the Public Company Accounting Oversight Board. This board oversees the accounting profession and publicly reporting companies with respect to audits and other reporting. It also has created rules designed to assure that auditors of publicly reporting companies are independent of the companies on which they report (3).
My appropriate way that I would do during my audit process was that I would ask questions to Toby and his accountants to provide concrete evidence of each item that include in the miscellaneous expense. My team members and I must test the selected items or all the elements from the miscellaneous account by reviewing all the supporting documents such as receipts and invoices. Moreover, the audit team has to conduct the procedure to interview Toby and his staff to clarify all the suspicious about their financial statement reporting amounts. Even Betty and her team had questioned Toby and his employee several times about their miscellaneous expense, they have just realized heavily on Toby’s answers since they trusted him for having a long client relationship, and this was the reason that makes them decided not to investigate further. In my opinion, it is crucial for Betty and her team to investigate further about her client’s miscellaneous expense because it could help them to discover more inappropriate actions that Toby had done to his company’s financial statements. As a result, I think that because Betty did not practice an appropriate professional judgment as well as professional skepticism; she and her audit team have missed red flag in Toby’s fraud
Once the ADP Approving Official has verified the accuracy of all documentation, have the Approving official sign the front of the DD Form 1348 and the “CPU Hard Drive Certification”, if applicable, then remove the barcode label and place it on the Oracle database printout sheet.
Work with proper authorities to right the wrongs. Admitting to authorities about the internal error found will help secure good faith. Try to take all steps suggested to work with proper authorities and minimize penalties. Legal counsel needs to investigate and secure assistance in all jurisdictions that have been affected by this situation. Progress needs to be tracked and communicated to leadership and audit teams weekly by legal counsel.
This assignment has three primary objectives with the first being to classify the types of audit opinion issued by the auditors of Petronas Dagangan Berhad. Audit opinion can be found on audited statements and auditor is required to state the opinion whether the statements have followed the generally accepted accounting principles (GAAP) or not. There are four types of audit opinion,
The major characters of the tradition audit are all information what is needed by auditors are on the paper and the manual calculators and without high communication technology. Auditors usually were limited by the place in the paper time. When a several people are working on the same auditing project for a client with offices in cities across the country, even worldwide, it takes a lots all time those auditors get the information which they need from the client, even there is risk paper information disappear for many reasons. on the another hand, mail paper information increase the auditing cost. The mistake caused by the manual calculators inevitably, no matter how fixed auditors concentrate on recalculate is, after all auditors are human. The global business become major in the modern business world, some example, several auditors who are in different locations are working a same auditing project, or auditors are in different city even country with the client, when there is issue among these auditors or between auditors and client, they only can communicate with each other by phone or be together and have meeting. Phone call can not make sure information been watched in the same time when the voice is talking about the issue, but having a meeting takes time and money make all people together, it increases auditing cost.
Personal responsibilities of the auditor (responsibilities). These include competence and capabilities, compliance with appropriate ethical standards, and approaching the work with appropriate professional skepticism and judgment. The company needs to be assured that the auditor assigned to their case is responsible and knows how to do their
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.