Should not all PCAOB members be taken from the investment community that uses audited financial statements? Why or why not?
PCAOB members should not consist of all individuals from the investment community as past experience with members of one exclusive community has proved to be ineffective in accurate oversight of business financial practices. The purpose of Public Company Accounting Oversight Board (PCAOB) is to protect investors and the public by ensuring that audit reports of U.S Public companies are independent and accurate. The selection of members must include and assessment of integrity and competency that is scrutinised for the public interest. Part of that scrutiny is the make up of the board members, their professions, experience
DuPont has been known for its low reliance on borrowings. In the 1970’s, the company had to assume a substantial portion of debt of Conoco, a newly acquired company. In 1983, the managers have to decide about the future optimal target debt ratio. Should the company continue to keep about 40% of its assets financed via debt or should it strive to lower its borrowings to 25%?
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).
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.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
Arrow Electronics is a distributor of electronic parts, including semiconductors and passive components. It was founded in 1935 and has reached number one position among electronics distributors by 1992. Arrow’s North American operations were headquartered in Melville, N.Y. Sales and marketing functions were divided among five operating groups. This case study focuses on the largest of Arrow’s groups, Arrow/Schweber (A/S).
JCPenney is an American retail store that was founded in 1902 by James Cash Penney. From 1913 to 1924, the company was called J.C.Penney and it was incorporated in 1913 and the company move its headquarter to New York in 1913. In 1927, JCPenney became a publicly traded company. There are more than 1,100 stores located both in United States and Puerto Rico and most of stores located inside the suburban shopping malls. Since 1998, it is one of the largest shopping retailer in the US which offered a wide range of products including family apparel, clothes, jewelry, shoes, accessories and home furnishing products. In the store, customers can find a well-brand such as Sephora, Mango, and also a variety famous labels like Arizona, Washington, and etc. Also, JCP invested a significant amount
Ernst & Young performed an audit of the consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ending January 31, 2006 for the Wal-Mart Stores, Inc. and January 28, 2006 for the Target Corporation. The responsibility of Ernst & Young is to express an opinion on the financial statements given by Wal-Mart and Target, holding both corporations responsible that the statements being audited are accurate and true. The audits have to be in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), which require that the audit must have sufficient evidence that the financial statements do not contain any false material.
In addition to establishing the PCAOB to regulate the auditors of publicly traded companies, SOX legislation contained the following sections that are especially pertinent to the accounting profession.
As the aviation industry developed rapidly over the years it was difficult for air traffic control (ATC) to keep up with the increased demands, and maintain an acceptable level of safety. Needed improvements to the ATC network had been identified by several government appointed committees, which included such things as: radar surveillance equipment, transponders, increased navigational facilities, more control towers and increased ATC staffing. However, due to continued budget cutbacks by Congress it wasn’t until the harsh reality of several deadly midair collisions that lead way to actual appropriations being made to update the airway and ATC system.
The PCAOB has the authorization to provide rules governing the following areas; ethics, independence, and quality control for any registered accounting firm...
Amazon.com, as an e-commerce website has emerged as a leader in the e-business world. Originally, the company began as a website that sold books at discount prices, now Amazon.com has evolved into a marketplace for the world. Jeff Bezos, the founder and CEO, has changed the business model of the company many times. He is focused on expanding the selection of goods and services offered on the website, in an attempt to please customers. However, he is having trouble managing the priorities of his gigantic company, he should give the existing categories priority and worry about expansion at a later time.
Organizations that only have top management as the board members are more susceptible to accounting malpractices. Members of the board should preferably own shares in the company to ensure diligence when it comes to the interests of the company. Apart from the Board of Governors, there should also be an audit committee in place to oversee the financial dealings of the bank. Members of the board and the audit committee should have basic financial knowledge. Some of the members should also be experts in finances so that they can detect any anomaly that may take place in terms of financial reporting. An overhaul of the regulatory framework is required to empower authorities to intervene immediately, and make improvements. New technology is required. Manual antiquated processes should be eliminated because this causes greater human error and poor
The PCC was responsible for determining if the exemptions or alterations proposed to the GAAP was acceptable and meant the needs of private company financial statement consumers. In addition, the PCC was the principal advisory group to the FASB in regards to ensuring the proper treatment was given to private companies. Additionally, the PCC works to review all existing regulations under the GAAP to see what standards would require amendments or alterations. The PCC looks to create, consider, and vote on the proposed exemptions or alterations that are to be made. The PCC’s ultimate job is to find the GAAP regulations that can be changed to help improve private company financial
...mpany Accounting Oversight Board (PCAOB) tasked with the oversight of audit of publicly traded companies under the authority of the SEC. The report card is still out on the new law as to whether it will cause change in the corporate office and the corporate governance.
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