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Assignment 3: Freescale Semiconductors, Inc.
Desislava Tabakova
Advanced Auditing
Additional laws and harsher penalties can eliminate crimes if the criminal feels that there is a direct relationship between punishment and crime. According to the deterrence theory of crime if there is certainty of punishment, additional laws and harsher penalties will reduce financial fraud or even mitigate it. Additional laws can make punishments more severe and harsher penalties can increase the intensity of punishments. These can be effective only if the enforcement of these laws is efficient and those who perpetrate financial fraud feel that they cannot escape detection if they commit a financial fraud.
First, harsh laws and penalties are sometimes …show more content…

Further, the company should also specify the punishment if a partner is found to violate the provision of communicating information with outsider. The punishment should include dismissal of the partner, a large mandatory fine, and reporting the incident to the Securities Exchange Commission. These controls will act as deterrent to fraudulent activities if these policies are implemented.
An alternate plan to act on the leaked information is to enter into a secret partnership with a rich friend. Donna would provide the information and the rich partner would provide the finances and a bogus company for the partnership. They would make a lot of money on the stock exchanges.
Currently, Donna Murdoch was either providing information to Richard Hansen who was the chairman of Keystone Equities, or was trading on her own account. The alternate plan would be communicated to her rich friend who was willing to enter into a secret partnership with her. Once she persuaded her friend with insider information about some deals that Ernst & Young handled information about, the secret partnership would commence.
Both consulting engagements and audit engagements have professional responsibilities relating to confidentiality of information, the level of responsibility for an auditor is much higher than that of a consultant. Specifically ET Section 301-Confidential Client information of the AICPA code of professional conduct requires

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