A professional judgment is a key factor in auditing. As a result of development of auditing and accounting industry‚ especially after a series of accounting fraud and auditing failure cases‚ such as Enron and Arthur Andersen‚ in the last decade‚ professional judgments is becoming a more and more important aspect for the independent auditing industry. Recently‚ many countries and professional bad issued more strict auditing standards to emphasize to this point. It means the auditor should be required
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Brham S. Inocencio BSA IV-A CASE 01 – Enron Corporation 1. List three types of consulting services that audit firms have provided to their audit clients in recent years. For each item‚ indicate the specific threats‚ if any‚ that the provision of the given service can pose for an audit firm’s independence. In the recent years‚ auditing firms provides the following consulting services to their clients: a. Internal auditing b. Design of accounting systems c. Various types of Information Technology
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accountability of corporate disclosures. New aspects were created by Sarbanes-Oxley for corporate accountability as well as new penalties for wrong doings. It was basically introduced after major corporate and accounting scandals including the scandals of Enron‚ WorldCom etc so that the same kind of scandals do not repeat again. The Sarbanes-Oxley Act does not apply to privately held companies. The act contains 11 titles‚ or sections‚ ranging from additional corporate board responsibilities to criminal penalties
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INTRODUCTION The Sarbanes-Oxley Act of 2002 came into force on 30 July 2002. It is commonly called SOX or Sarbox. It is a United States federal law passed in response to a number of major corporate and accounting scandals including those affecting Enron‚ Tyco International‚ and world Com. These scandals resulted in a decline of public trust in accounting and reporting practices. It is named on sponsors Senator Paul Sarbanes and Representatives Michael G. Oxley. The legislation establishes new or enhanced
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public companies and accounting firms. Some individuals may call it an object failure while SOX hoped to create more confidence in capital markets it does not prevent fraud or abuse from occurring. It is undeniable that SOX has led to greater internal control of financial reporting‚ and increased expertise and independence among more-focused boards‚ committees‚ and directors. SOX
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which leads to analysis of the impact of management integrity information on audit conduct. Motivation Some cases of failures such as Enron and Sarbanes-Oxley have led public in general requiring auditors to be more careful in conducting their audit tasks‚ especially in terms of audited companies’ internal controls. The basic of these internal controls is built by its management integrity. By knowing the management integrity‚ it is expected that auditors will be more aware in planning their
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CHAPTER AUDIT PLANNING AND ANALYTICAL PROCEDURES THE FALL OF ENRON: DID ANYONE UNDERSTAND THEIR BUSINESS? 8 LEARNING OBJECTIVES After studying this chapter‚ you should be able to 8-1 Discuss why adequate audit planning is essential. Make client acceptance decisions and perform initial audit planning. Gain an understanding of the client’s business and industry. Assess client business risk. Perform preliminary analytical procedures. State the purposes of analytical procedures and the timing
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Parmalat‚ Europe’s Enron of fraud‚ undermined European accounting and reporting standards. The fraud‚ totaling nearly 18 billion euros‚ brought down the Italian dairy giant and ruined investors across the globe. Such a enormous fraud‚ some would assume‚ would need to be highly complex and fully developed in plan as well as execution. However‚ as Parmalat executives began to cooperate in the investigation‚ it was uncovered how rudimentary their fraud was despite the enormity in which it occurred.
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significant information Intentional misapplication of accounting principles 2-27 The reporter’s statement makes sense. Asset misappropriations are much easier to accomplish in small organizations that don’t have sophisticated systems of internal control. Fraudulent financial reporting is more likely to occur in large organizations because management often has ownership of or rights to vast amounts of the company’s stock. As the stock price goes up‚ management’s worth also increases. However
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FIRST INTRODUCED BASED ON THE PRACTICE FOLLOWED IN DEVELOPED COUNTRIES AND ALSO KEEPING IN MIND THE OECD PRINCIPLES ON CORPORATE GOVERNANCE THE CORPORATE WORLD HAS WITNESSED THE ENRON FIASCO AND THE ENACTMENT OF SARBANES OXLEY ACT IN THE USA .ARTHUR ANDERSEN THE AUDITORS OF ENRON WAS FOUND GUILTY BY THE US JURY ENRON IS JUST AN EXAMPLE – THERE WERE MANY OTHER LARGE CORPORATES WHERE INVESTIGATIONS HAD REVEALED HOW INFLATED EARNINGS WERE REPORTED AND HOW FINANCIAL REPORTINGS WERE MANIPULATED. SOX
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