ACC565 Week 10 Discussion 1 and 2 Essay

In auditing ,the auditor would address that auditing has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Auditor have no responsibility to plan and perform the audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud that are not material to the financial statements will be detected. In this case, the misstatement is material, KMPG has an compelling obligation. The auditor failed to detect the relevant fraud account for six years.

Nestled in Southern Indiana just west of Louisville, Kentucky and south of Indianapolis, Indiana is Dubois County, Indiana. Dubois County is comprised of the towns of Birdseye, Ferdinand, Holland, Huntingburg and Jasper. Of those towns, Jasper is the largest and is the county seat (Kelly School of Business, 2014). Over fifty-two percent of the population consists of adults ranging from 25-64 years of age (Kelly School of Business, 2014). The leading cause of mortality in this county is heart disease, cancer, suicide and injuries (Memorial Hospital and Health Care Center & Dubois County Health Department, 2011).

Misstatement in auditing is the difference among the amount, grouping, presentation or disclosure of any reported financial statement element and the amount, grouping, presentation or disclosure mandatory for the element to be in agreement with the pertinent financial reporting framework (Moroney, Campbell, & Hamilton, 2014). Material misstatements can occur due to either fraud or error (ACCA Global, 2014). The auditor ought to ascertain and evaluate the risks of material misstatement right from the financial statement level and the assertion or declaration level (Arens, Elder, & Beasley, 2013). The process involves first gaining an understanding of the organization and its control procedures.

Under the Security Act of 1933 and 1944, any individual that willfully filed untrue statements should be penalized. Auditors acting behalf of the public’s interest should make sure the company’s financial statements are not misleading. All the testing and auditing procedures are to verify that the number on the financial statements, and audit testing should be supported by substantial evidence. When auditors took their responsibility for and but did not show their competence for work, they should be heavily fined because their carelessness resulted the investors making a bad decision. Furthermore, if the auditors did not take their responsibility and showed no work to support their opinions should be charged as gross negligence with a heavy fine and license taken away. If it comes down to fraud, auditors should definitely face criminal charges along with their auditing company, and their license should be taken away

List the fraud risk factors that the CPA firm might encounter if they accept this audit engagement. Be sure to include a discussion of all items that will probably require special attention during the audit. For each of these fraud risk factors, indicate how the auditor should follow up on each potential problem if the engagement is accepted. Use the following format:

Related party transactions throughout the history of accounting tell the tale of fraud and intent to deceive. While many related party transactions are carried out without the intent to commit fraud with the misrepresentation of financial reporting, these are not the stories that have led to the AICPA’s clarified standard on auditing, AU C 550 Related Party Transactions, effective for all audits after December 2012, and the PCAOB’s AS 18, Related Parties, issued in June 2014. An understating of the evolution of guidance and rulings as applicable to related party transactions is necessary to evaluate whether the risk associated with such transactions can be mitigated through the audit process, or if tougher penalties should be put in place to make the rewards for management less attractive and the punishment equally something to be avoided.

Professionally, I've experienced fraudulent financial information in several scenario as a tax preparer that help small business owners report its annual taxes which usually require the organization to fulfill a consideration to the Internal Revenue Service. Many of my clients have no problem fulfilling such obligations as its expected, and many companies can forecast its tax cost. Basically, most business owners take accountability and just looking to get any information on potential tax breaks. On the other hand, I've encountered a few situations where the financial statements seemed either understated, overstated, or have some other form of deception. When I notice this I recommend to the business owner to hire an ongoing accountant, and that I can't file a tax return because the information is insufficient.

Evaluate whether the selection and application of accounting policies by the entity, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting resulting from management’s effort to manage earnings

During the month, the company purchased an additional $68,000 of raw materials. During May, $92,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $5,000. The debits to the Work in Process account as a consequence of the raw materials transactions in May total:

Forensic accountants need to possess strong written and oral communication skills. In this profession it is imperative to have a strong accounting background; a thorough knowledge of auditing, risk assessment, and control and fraud detention; and a basic understanding of the legal system. It is important for forensic accountants to possess the ability to interview and effectively elicit information from people who may not be willing to give truthful answers. Therefore, it is important for forensic accountants to be skeptical of those people that they deal with. Knowledge and experience in financial planning and management techniques, as well as advanced computer skills, including an ability to understand and apply various information technology and accounting systems, are also key characteristics of forensic accountants” (Crumbley, 2003)

As our company is in process of conducting investigation to detect any financial statement fraud or abuse, I have come across the case where expenses were recorded in the financial statement under the period it was disbursed to vendor and actual services occurred in next or other financial year period. It’s against the regulation of SEC and GAAP guidelines. In this particular case the repair were completed in current

One of the largest cases of fraudulent financial reporting in India’s history is the Satyam scandal where the CEO of Satyam Computers Ramalinga Raju, revealed on January 7 2009 the company had been providing false financial statements. The management of Satyam had overstated the company profits by a huge amount of $1 billion over the years. The implications of this fraudulent reporting on the management of the company are as follows:

The third moral issue in Tyco case that identify with irreconcilable circumstance is bookkeeping misrepresentation. Bookkeeping misrepresentation can be depicted as any demonstration or endeavor to control the monetary explanation for monetary benefit. It can be one of the legitimate issues for this situation on the grounds that it comprises of extortion which is unlawful in composed law. The irreconcilable situation emerges for this situation on the grounds that the reviewers, bookkeepers, and administrators of Tyco International dissolve trust and their own advantage has enormously fluctuated with the enthusiasm of shareholders and the partners in Tyco. They tend to give up the nature of money related reporting data for their own advantage.

The collective understanding of all the three investigative agencies’ records in September 2012, four months after the criminal complaint was filed, detected ‘systematic mismanagement’ in the running of the company, and the keeping of its accounts. The mismanagement included violations of business procedures (over-invoicing and overvalued invoicing, for instance), which in turn could have led to income tax violations.

An employee of my client company, Saudi Airline Catering (SAC), embezzled $24,300 through a scheme that had gone undetected until discovery by an accountant after this employee made a claim that Saudi Airlines had deducted $6,000 from his salary. The employee, Adam, was not approached by SAC about the embezzlement to pay the money back. Instead, a spokesperson for SAC claimed that this employee would likely refuse to acknowledge his criminal behavior, so my client, SAC, decided to go ahead and try to recoup the money through deducting it from his salary. In addition, SAC intended to black list Adam from procuring commissions for sales on future SA flights because of his embezzlement crime. Yet, when suggested that SAC pursues a legal action against Adam, SAC declines to pursue the matter in a Saudi courtroom because of the supposed hassles entailed in doing so and the length of time it would take to convict Adam of this crime and force him to repay the money he stole from SAC. However, by taking this suggested action, it is evident that Adam will possibly take up a lawsuit against SAC for deducting that amount of money from his salary and blacklisting him from receiving any future sales commissions. In addition, this employee may charge SAC with any number of violations of their legal relationship by seizing this kind of money from his salary and suspending his sales commissions based on the assumption that he embezzled the money. If this legal development