and will obtain their information from asking the management a variety of questions rather than obtaining an understanding of the internal control structures and obtaining evidential matter throughout inspection, observation or confirmation as an audit process requires. Upon completion of the process the accountants will issue an opinion providing limited assurances on the fair presentation of the financial statements. This limited assurance opinion is different from an audit opinion as it provides
will ultimately help her company. The cost savings mentioned by McKinsey consultants provides confirming evidence in support of Patricia Dunn’s views and HP’s acquisition of Compaq. She responds positively because McKinsey consultants reaffirm her decision. 3. The technique that HP executives used is not the same or comparable to traditional discounted cash flow analyses. Two years from now, HP expects to save $1.5 billion after tax every year into perpetuity. If HP discounted those savings
The purpose of the memo is to describe the auditor 's responsibility to consider fraud in financial statements by following eight steps to make sure the financial statements are free of material misstatement. The memo begins with an elaboration of fraud and the concepts related to it. A list of the steps is then provided before finally giving an outline of the various generic red flags of fraud that can act as a lead to the auditor in identifying fraud. Fraud is misappropriation and misuse of the
Is earnings management good or bad? Who (or which part of corporate governance mechanisms) is responsible to constrain earnings management? To what extent can the auditor constrain earnings management? Propose some methods for the auditors to detect and constrain earnings management. Does market react to firm's earnings management behavior? In order to discuss earnings management and what its affects are on business and whether or not it's a good thing, one must first understand what earnings management
tools to inform investors and other stakeholders about management’s performance. However, accounting standards permits management to use judgment in financial reporting methods for some accounts as they have best knowledge of its business so it can choose accounting alternatives that suit their business. With ability to choose its preferable reporting methods, estimates and disclosure, this flexibility creates opportunity for managers to distort earnings in which they adopt accounting methods that do
In any business operations, full financial disclosure refers to the provision of the necessary information about a company for better decision making by the people accustomed. It is the financial revelation of a given company. There are some financial disclosures in any business that ensure proper understanding of financial statements to the financial readers, or potential auditors. Examples are the annual financial reports and the financial declarations of the company. The annual financial reports
requirements and fix problems from client’s perspectives. The situation that two roles mixed in Andersen made top managers decide to sell more consulting service which earned higher profits. Then Andersen rewarded accountants who could be involved with profitable consulting project no matter how troubled the clients were. Through the 1990s, Andersen aggressively sold lucrative consulting services to those who relied on them for audits and Andersen's top partners tripled their earnings in the '90s. Due to this
a brief outline of the aforementioned document: • Description and characteristics of fraud. o Misstatements arising from fraudulent financial reporting. o Misstatements arising from misappropriation of assets. • The importance of exercising professional skepticism. o Professional skepticism is an attitude that includes a questioning mind and a critical assessment of audit evidence. • Discussion among engagement personnel regarding the risks of material misstatement due to fraud. o An exchange of
Matter? Janice Rhodora P. Carpentero La Salle University and Eljoy Delos Santos La Salle University May 22, 2013 Does Auditing Matter? SUMMARY: The scrutiny auditing has received post-Enron provides compelling evidence that auditing does matter, to answer the rhetorical question posed by the paper’s title. What is unclear, however, is whether auditing was sufficiently “broken” in the first place to warrant the radical reforms and changes effected by the Sarbanes-Oxley
Accounting Horizons Vol. 21, No. 2 June 2007 pp. 165–187 Auditor Communications with the Audit Committee and the Board of Directors: Policy Recommendations and Opportunities for Future Research Jeffrey Cohen, Lisa Milici Gaynor, Ganesh Krishnamoorthy, and Arnold M. Wright SYNOPSIS: To contribute to the Public Company Accounting Oversight Board (PCAOB) project on auditor communications with audit committees and boards of directors, we present in this paper a review of relevant academic literature