process. (AICPA, 2002) If many inexperienced auditor conducted the important and detailed auditing procedure, the quality of auditing work will be adversely affected. So, many inexperienced auditors might need a mentor to supervise them and give them some advice. However, this kind of mentor help only happened when someone was an inexperienced assistant or an entry-level accountant. In this case, Flanagan was a senior-level manager. Even though he does not understand this particular area auditing work, he still has his own understanding what is an appropriate and right behavior in auditing field. So we would not normally expect Trauger to supervise or oversee Flanagan’s work closely. Robert asks his two subordinates to delete and make fake …show more content…
because this will violate the professional conduct standard. Here are some alternative courses of actions that are available for Oliver Flanagan. One obvious ways that Flanagan could have and probably should have taken would have been to consult other audit partners within the San Francisco office. This will certainly solve the Flanagan’s dilemma. The audit partners that Oliver contacted will discuss with him and convince him that altering the audit work-papers was not a reasonable decision. If Flanagan had chosen this alternative, this will impair the professional relationship between him and Trauger. Another option would have been to discuss the matter with Michael Mullen, the other audit manager assigned to the Next Card engagement. He and Mullen could then approach Trauger together to solve the problem. Finally, this option would be the alternative if other option does not work; Oliver could approach Trauger directly and told him what bad thing would happen to different kinds of people if we alter the audit work-papers. If Trauger still continues doing that and not listen to Oliver’s advice. Oliver could ignore Trauger and report his behavior directly to the authorities even though this will harm himself too. But at least, he would not face jail and fine and other innocent people would not be harmed in this …show more content…
• Other members of the accounting profession: Poor judgment by an individual accountant, if widely publicized, can serve as a “black eye” for the entire profession.
• Investing and lending public: These individuals and entities rely on independent auditors to carry out their “public watchdog” function rigorously, including reporting honestly and candidly on their clients’ financial statements. The integrity and efficiency of our nation’s capital markets are undermined when auditors do not fulfill their professional responsibilities. This will cause these individuals lose faith on the auditing work and might not cooperate with auditors anymore.
• Robert Trauger: As a colleague of Robert Trauger, Flanagan had an obligation to consider his best interests and the best interests of his family. Just imagine the grief that Trauger would have avoided if Flanagan had convinced the audit partner that it was inappropriate to alter the Next Card
In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment.
A summary of the case details (provide the circumstances surrounding the case, who, what, when, how)
As a partner in the public accounting firm of Deloitte & Touche. LLP. James, in this case, was responsible for this violation. First, James was no on the basis of full inspection of the subsequent discovery existing at the date of the auditor 's report. Second, he did not detect and address problems regarding Ligand Pharmaceuticals ' exclusion of certain types of returns from the evaluation of future returns. Last but not least, he did not adequately perceive the reasonableness of Ligand’s estimates of future product
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
The principles of the AICPA Code of Conduct should guide the work that Jose and Emily do as auditors. The principles that specifically apply to this situation are Responsibilities, The Public Interest, and Due Care. CPAs have the responsibility to “exercise sensitive professional and moral judgments in all activities.” (Mintz, p. 19)
Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).
Oliver also issued a negative evaluation of Daniel’s performance in the audit. Daniel must decide what to do about the situation because his name is on the files that Oliver changed.... ... middle of paper ... ... falsifying information in the system.
Coaching and mentoring are not about learning to do something the right way, but are about helping to lead an individual to find their own way of doing it practically and efficiently. Coaching and mentoring sessions are guided with theoretical models, which help focus both the coach and the coachee in attaining desired outcomes for problem situations. However, even with the aid of theoretical models not everyone can coach another person. The first and far most important attribute of a coach is the ability to build relationships with the coachee in that the coachee feels safe and trusting towards the coach, without the capability to interact with the client there may be a lack of progress or motivation. Another important skill of a coach is not to judge.
Within the current crisis of confidence in the public accounting profession after the Enron debacle and series of high profile failures of financial services firms, the issues about ‘audit expectation gap’ have never been more important. Though it would take an enormous amount of effort to address these issues, I will argue that tremendous amounts could be done in order to close the gap down. In this essay I will discuss some of these issues and in particular the strategies to reduce the gap.
Giroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
Accounting ethics has been difficult to control as accountants and auditors must keep in mind the interest of the public while that they remain employed by the company they are auditing. The accountants should take into account how to best apply accounting standards when company faces issues related financial loss. The role of accountant is crucial to society. They serve as financial reporters to owe their primary constraint to public interest. The information provided is critical in aiding managers, investors and others in making crucial economic decisions. An accountant is responsible for any fraudulent financial reporting. Some examples of fraudulent reporting are:
It is argued that it is very rare issues within the audit field actually arise due to auditors knowingly working within the interest of their clients, however auditors may find it extremely difficult to remain impartial in their reports. The point being made is “the problem lies not in our desire to be unfair, but in our inability to interpret information in an unbiased manner. Self-serving biases exist because humans are imperfect information processors.” (Bazerman et al, 1997, p) This is a very good point that I strongly agree with. What they are saying is that an auditor is reporting under bias completely unintentionally due to psychological traits that cause people to be biased to their own self-interest when attempting to be impartial. This is true across many fields, in teaching for example. Here, cl...
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.
4) . One of the largest bankruptcies in history was enabled by accountants hiding debt and destroying the evidence to avoid implication (Buckstein, part 2 pgs. 1, 2, and 3). These unfortunate events led to the need for increased scrutiny and regulations, including the Sarbanes-Oxley Act (Buckstein, part 3 pg 1). This legislation inspired the creation of the Canadian Public Accountability Board (CPAB) (Buckstein, part 3 pg 1). These changes have led to an increased awareness of the need for auditor independence as well as higher standards for accounting and business in general (Buckstein, part 3 pg 1). While these measures have helped to reassure the public, there is still the question of why Accountancy is not a protected
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.