Audit

rationale. a) General Standard #2: The auditor must maintain independence in mental attitude in all matters relating to the audit (AICPA, 2012). Anderson did not practice independence from the company they were auditing. They were too involved in too many of Enron’s activities. b) General Standard #3: The auditor must exercise due professional care in the performance of the audit and the preparation of the report (AICPA). They failed to act in a professional manner and to practice due care when they

According to Investopedia online (2015), Sarbanes-Oxley Act of 2002 (SOX Act) is defined as a “legislative response to a number of corporate scandals that sent shockwaves through the world financial markets.” Prior to SOX, the United States faced major financial scandals in the American history. Some of the biggest financial scandals involved such high-profile companies as Enron, Tyco, WorldCom, and Arthur Andersen. Two types of fraud exist in the corporate world. First is fraudulent financial reporting

's balance sheet. They used audit assistants in their standardized audit programs and hence failed to take into account the specific audit risks for each engagement. Due to their large number of clients, they neglected to give enough time for their review procedure in the company and never supervised the inspection assistants. They also failed to evaluate whether the audit results provided by the corporation had sufficient evidence. Part 3 A. The following were the audit risk factors identified based

An auditor’s role in an audit is very important. An auditor must be able to collect enough evidence to supports their finding, and also be on the lookout for fraud. Company’s may or may not know the law, but it is the job to know the law, and be able to educate and report findings properly. Since the Sarbanes-Oxley Act, there have been provisions that have directly affected auditors. This paper will include the details of the Sarbanes-Oxley Act, how ethics and independence have affected auditors

of the ways to strengthen auditors independent is rotation of audit firms at regular intervals. Currently it is required that the rotation of the lead partner in an audit firm to be conducted every five years. However, this current law of rotating audit firms doesn’t address the real conflict in the auditor/audited relationship. Recent academic studies in both the U.S. and other countries suggest serious disadvantages to mandatory audit firm rotation. Key among them is the loss of the current auditor

The mandatory audit partner rotation was also one of the aspect targeted by SOX and requires that every lead partner or reviewing partner must be rotated every five years in order to bring a fresh look to each engagement. A particular aspect of all this rotations is the possibility to impose mandatory rotation of registered public accounting firms. The SOX requested to the Comptroller General of the United States to conduct a study addressing this issue and the implications of this requirements.

other scandals involved the world’s most highly reputable audit firms, such as Arthur Anderson, PwC, and KPMG. Although auditors can be sued for negligence in the United States, such suits are rare or effectively absent in Japan, Germany, and India. With the biggest, most reputable audit firms failing in both high-litigation and low or no-litigation countries, it is appropriate to revisit the “reputation rationale” (DeAngelo, 1981) for audit quality and investigate to what extent reputation concern

Auditor independence and a prohibition on audit firms offering value-added (read "conflict of interest") services * Certification of financial reports by CEOs and CFOs First, Congress saw the need to create an independent body to oversee the audit of public companies that are subject to the securities laws. PCAOB was established to protect the investors and further the public interest in the preparation of informative, accurate, and independent audit reports for public companies. Before the

The Scandal Bernie Madoff was known as a hard worker who, at one point, created the largest buying-and-selling market maker at the NASDAQ from being a mere penny stock trader in the 1960s. He was a stock broker, a financial advisor, and a chairman of the NASDAQ. As of December 11, 2008, he primarily became known for being responsible for the largest Ponzi scheme in history. He was able to make $50 billion disappear as if the money had never existed by using new investors’ money to pay out the

Deloitte was providing Adelphia with external Audit for more than 15 years, but suddenly (in the end of 2001) they stopped working, claiming that the information provided by Adelphia was unreliable. After the criminal investigation conducted by the SEC, Deloitte was accused of negligence, deception and failure to reveal fraud. According to the SEC (2005), the results are “Deloitte & Touche LLP has agreed to pay $50 million to settle charges stemming from its audit of Adelphia Communications Corporation