External Audit Papers

With different industry definitions and viewpoints, fraud can be a tough issue for audit committee members to grasp for oversight purposes. The legal obligations of audit committee members have intensified because their standard duty of care and loyalty to the entity has increased in light of management fraud activities.

2 Managing fraud risk: The audit committee perspective Fraud in a fi nancial statement audit

In the last decade, the world of business has been subjected to significant changes. Globalization has given a new meaning to the way in which business is now conducted; i.e. business in a world devoid of geographical boundaries or time zones. Global expansion has also given rise to many emerging firms and laid the foundations for fierce competition amongst existing industries. Internal auditing is no exception. In order not to face complacency or obsolescence, the internal auditing industry has to be proactive and adapt to changing market trends.

In addition to audit controls, access controls are important because they help reduce the risk of internal data breaches by preventing unauthorized work staff to have access to ePHI. “Only individuals with a “need to know” should have access to ePHI” (Brodnik, Finehart-Thompson, & Reynolds, 2012, p. 304). Additionally, Brodnik et al., (2012), states that access controls are used to aid in the authentication, audit and authorization process by implementing unique specifications such as: a unique user identification number, emergency access procedures, having an automatic log offs, and by having unique specifications within the system that allows for encryption and decryption

Auditors should look out that the company may have the opportunity to carry out the fraud. There have certain conditions that will occur this opportunity

The readers should read this specific study to understand corporate fraud. Corporate fraud occurs more regularly than one may think, therefore, understanding what corporate fraud is and the history surrounding it would allow companies and accounting professionals to understand how to help prevent it from occurring within their workplace. In addition, the research provides vital information and history regarding SOX, PCAOB, and AICPA and the rules and regulations required with financial statement reporting and how to better implement rules and regulations to make the company a safer place of business. The research is also vital to companies and accounting professionals as it explains the type of people that commit financial statement fraud

According to AU-C Section 240 paragraph .05, when conducting an audit in accordance with GAAS, an auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement due to error or fraud (2012, December 15). To obtain reasonable assurance, the auditor is responsible for maintaining professional skepticism, considering management’s ability to override controls, and recognizing that audit procedures for detecting error may not be effective in detecting fraud according to paragraph .08 (2012, December

Fraudulent, erroneous, and illegal acts committed by a public company, usually at a managerial or executive level, have been a very serious problem for many years and have prompted development of strict and updated regulations, such as the Sarbanes-Oxley Act, in an attempt to prevent these occurrences. Unfortunately, these new or updated regulations are not enough to prevent these acts from happening, thus not alleviating the auditors of their responsibility to detect fraud. Some methods that management and auditors can employ to prevent and detect fraud, errors, and illegal acts are: improving knowledge, improving skills,

SOX requires that companies have an audit committee that includes independent members and members of the board. SOX also requires the company to disclosure whether one of the internal auditor is a financial expert and whether they are directly responsible for overseeing the external auditors. This is to ensure that the financial statements are understand, that there is proper communication with the external auditors and that there is an understanding of internal controls. In order to enhance standards for nonprofit accountability and financial reporting all nonprofits should have an independent audit committee (BoardSource 2003).

I would also like to recommend some internal controls that can be implemented and followed by CEO and CFO that could prevent the Financial Statement Fraud. They would include establishing and promoting an effective whistleblower program, segregating of Accounting function from the transaction performing staff, creation of right culture, non tolerance of frauds at any level, matching cash flows with revenues, analysis of Swings in Assets and Liabilities, and continuing education and training program.

"Corporate Fraud"…when you hear those words the first, most recent incident, many think of is The Enron Scandal. This same scandal produced the Public Company Accounting Reform and Investor Protection Act of 2002. This much needed act created the Public Company Accounting Oversight Board under the Security Exchange Commission 's supervision. This board sets accounting standards and investigates Certified Public Accountants and companies to ensure they are following the guidelines set forth. This board has also been given the authorization to fine, suspend and recommend criminal investigations in the event CPA 's and their firms violate the standards. (Lindstrom) To understand the stringency of this Act is to recognize what brought it

Internal auditors cannot effectively provide an analysis on the company’s internal dealings as they are part of the company. External auditors, however, can observe these processes from the outside and then determine where the funds of the company and whether the dealings adhere to the regulations. Using external auditors in a company prevents conflict of interest from happening. Conflict of interest is a situation where an individual or organization has multiple interests and of those multiple interests, one could possible corrupt the motivation for an act on the other when the auditor has any kind of beneficial interest in their client’s performance. In other circumstances, there is also the threat of familiarity where auditors become

A business can not work out without an account system, which includes internal. Internal controls are used by companies to make sure financial information is accurate and valid. Strong internal controls are signs of a financially healthy company and protect the company’s integrity. Strong internal controls can also increase a company’s profitability. There are several types of internal controls that companies used to protect themselves such as: Segregation of duties, asset purchases, supervisor review, internal audits and adequate documents and records. This paper will discuss several topics from a case study about And the Fraud

The lack of independence for external auditors will lead to the neglect of auditing risks (William R.K., 2003), which are the main reasons for the failure of certified accountants and professional accounting organizations. The consequence of the external auditors deprived of independence would be very serious. And there are many cases, which aroused by the failure of external auditors and most are related to the lack of independence. One famous example is the bankruptcy of Enron and the role played by its external auditor, Arthur Andersen (Todd, S., 2003). Arthur Andersen was once one of the biggest accounting companies in the world, and was canceled for the involvement in the Enron bankruptcy scandal.

Internal Audit is an independent, objective, assurance, and consulting activity designed to add value and improve operations. It helps accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.