AFM 351 Satyam Fraud

822 WordsJul 21, 20154 Pages
AFM 351: Audit Strategies Satyam Fraud: A case of India’s Enron 1. Describe the governance structure at Satyam. What was the “tone-at-the-top” at Satyam during the fraud period? • • • • • • • 2. In terms of the confirmation of cash balances, what deficiencies can you identify in terms of the procedures followed in the Satyam engagement? • • • • 3. Ramalinga Raju was the Chairman of the Board His brother, Rama Raju, was the Managing Director and CEO They both had direct operational control over all aspects of the company’s operations. The “tone-at-the-top” during the fraud period was fairly unethical, however, the whole company was not completely unethical. The leaders of the specific business units may have had a…show more content…
o The auditors should have done further testing should have been performed to discover the reason behind the differences. o However, the auditors just accepted the management’s confirmations as correct because they believed the senior management was honest. o It is the auditor’s responsibility to exercise due care and professional scepticism. o By not performing further testing, the auditors did not exercise due care. o By not questioning the management’s confirmation, they did not show professional scepticism. The last deficiency is that the engagement team did not take any action even after another partner from PwC Network Firm outside of India criticized their working papers. o The comments from the outside partner were received before the release of the 2008 audit report. o The audit team should have adjusted their testing based on the comments especially since it indicated that their testing was substantially deficient. What procedures should take place when an audit over internal controls indicates that there may be significant deficiencies? Was the timing of the Satyam A/R procedures appropriate given the internal control assessment? (review and refer to your CAS) • • • • • • 4. When testing of internal controls indicates that there may be significant deficiencies, then the auditor should go back to the audit plan and re-evaluate the control risks and set the control risks as higher. With setting the control risks higher, the auditor would want to

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