The Auditor and Fraud Essay Example

The Auditor and Fraud Essay EXPLAIN THE RESPECTIVE ROLES AND RESPONSIBILITIES OF MANAGEMENT AND AUDITORS IN THE PREVENTION AND DETECTION OF FRAUD. The primary responsibility for fraud detection lies with management. This arises due to a contractual duty of care. Directors are able to discharge their duty toward prevention and detection of fraud and error in many ways, for example: * Complying with the Combined Code on Corporate Governance * Developing a code of conduct, monitoring compliance and taking action against breaches * Emphasising a strong commitment to fraud prevention. This involves establishing a culture of honesty and ethical behaviour within the organisation with clearly communicated policies. * Establishing an internal audit function * Having an audit committee The role of the auditor is with assessing the effectiveness of the internal controls. Auditors should appraise the risk of misstatements due to errors and fraud. The role of the auditor in the detection of fraud is appraised within case law, for example: Re Kingston Cotton Mill (1896) – An auditor â€Å"is a watchdog not a bloodhound†. According to Melville (2007), this judgement set the tone for the audit profession for a century. Auditors were to be passive checkers rather than be proactive in searching out errors, misstatements and fraud. This statement may no longer have the force it once did in the light of ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements. Auditor’s are now expected to recognise at least the possibility that fraud may exist and, consequently, adopt an attitude of professional scepticism in their approach to audit work. Re Thomas Gerrard Son (1968) highlighted the negligence of auditor in overlooking fraudulent activities committed by directors. We will write a custom essay sample on The Auditor and Fraud specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The Auditor and Fraud specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The Auditor and Fraud specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Auditors relied on stock certificates given to them by the managing director, a person who they trusted. This was supported by the decision in Re Kingston Cotton Mill whereby an auditor is ‘justified in believing tried servants of the company in whom confidence is placed by the company’. It was held that their responsibility was to investigate the matter fully once their suspicions had been aroused. If they had done so, the fraud would have been revealed. This is supported by the content of ISA 240 which requires auditors to follow up anomalies. Once suspicions have been aroused, tests designed specifically and uniquely to detect and establish the extent of fraud will be performed. Auditor’s should plan and conduct their audit tests to limit the possibility that material fraud and irregularities go undetected. Certain assets such as cash are more susceptible to fraud than others and audit planning should take account of this. Tests are mainly carried out due to the need to assess whether a matter is material before reporting it. If the matte proves to be material, it should be first reported to management (unless management are implicated in the fraudulent activity themselves). Auditors cannot guarantee the detection of all frauds and errors because they are not able to spend the time searching for frauds as they only analyse a sample. A guarantee cannot be made as auditors provide an opinion. IDENTIFY AND DISCUSS BOTH THE ORGANISATIONAL AND PERSONAL FACTORS WHICH MIGHT CONTRIBUTE TO AN ENVIRONMENT WHERE FRAUD IS MORE LIKELY TO OCCUR. The integrity of the individual and whether they seem to have a strong sense of ethics. Although a difficult characteristic to assess, the behaviour of individuals and their opinions on issues may provide important evidence to assist the auditors in assessing this characteristic. Personal integrity may well be a key if not the most important factor in keeping a person from committing fraud. There are many cases in which individuals with severe financial or personal pressures and the opportunity to engage in fraudulent activity do not do so because they have a strong personal moral code. Some fraud investigators believe that a strong moral code can prevent individuals from using rationalisations to justify illicit behaviour. Typical rationalisations include: I am only borrowing the money and will pay it back Nobody will get hurt (perception of fraud as â€Å"victimless† crime The company treats me unfairly and owes me Its only temporary until my financial position improves Everybody’s at it!! The extent to which individuals appear to be motivated by greed. Again, a difficult characteristic to assess but the individual’s concern with money and consumer goods may provide some clues about this. If someone starts turning up to work in a brand new Ferrari, they may have won the lottery, or benefited from the demise of a loving relative, or they could be up to no good!! The degree of loyalty exhibited by an individual. If the individual has been with one firm a long time, this may indicate a certain level of satisfaction with their employment and perhaps reduce the likelihood of them committing fraud. You should, however, also be aware that experienced employees, because they are trusted, might have a greater opportunity to commit fraud. Ernst Young Survey (2000) found that nearly half of the employees who defrauded their firms had been employed for over five years. Also bear in mind that opportunities to commit fraud can arise when an employee reaches a level of trust in an organisation or when internal controls are weak or nonexistent. Then the employee if he or she is so motivated will perceive that there is an opportunity to commit fraud, conceal it, and attempt to avoid detection and punishment Also, recent research undertaken by the Wharton School at the University of Pennsylvania suggests that in order to make it to the top ranks of corporate management you of course have to be very self-assured, but this can turn into overconfidence which can lead you to â€Å"cross the line† and commit fraud. For example, a senior manager believes that his firm is experiencing only a bad quarter or patch of bad luck. He believes it is in the best interests of everyone involved – management, employees, customers, creditors and shareholders to cover up the problem in the short term so that these constituents do not misinterpret the current poor performance as a sign of the future. In addition, he is convinced that down the road the company will make up for the current period of poor performance. It is the optimistic executive or overconfident executive who is more likely to have these beliefs. May stretch the rules a little or engage in earnings management ploys, but what if things don’t turn around as expected? Then he has to make up for the prior period and that requires continuing fraudulent behaviour. There appears to be a belief that overly optimistic executives can turn their firms around before fraudulent behaviour catches up with them, at least according to the US research. Jordan (2002) as cited in Quirke (2008) reaffirms this attitude by quoting a communist era Czech axiom â€Å"If you do not steal from the state, you rob your family† Antonio Birritella; â€Å"All these funds from the EU were seen as a gift to the Mafia, easy pickings†

Halliburton Essays

Halliburton Essays Halliburton Essay Halliburton Essay The company has gone through some negative publicity for exercising developing questionable business practices that have Impacted the American sprayer. In this paper I will evaluate Hallucinations planning approaches, analyze the influence of their corporate structure and their management initiatives. According to the Hallucination website (2009), the company consists of two divisions: Drilling and Evaluation and Completion/Production. Drilling and Evaluation provide its customers with an array of services that include: Abroad fluid services, Sperry drilling services, security drill bits, Hireling and Perforating services and Landmark and Project management. On the other hand, the completion and production dolls ancestress on delivering production enhancement services such as cementing, intervention and completion services. With so many responsibilities, Hallucinations management style and initiatives must be socially responsible and professionally aligned with its mission. In order for Hallucination to be successful, the company must have effective planning strategies that work. Hallucinations key to effective planning lies on their ability to keep their employees safe, employing its people according to their capabilities and developing technologies and financial Initiatives that bring confidence to Its customers. Furthermore, Hallucinations planning initiatives derive from several job performance initiatives. These include: the done right index, customer cost of poor quality, and customer non-productive time programs. With these checks and balances, Hallucinations ultimate goal Is to provide Its employees and customers with zero health, safety environment incidents, zero cost of poor quality and superb customer satisfaction. Additionally, in order to meet long term goals, the company has a board of directors that are responsible for reviewing long term strategic and business plans annually. : Hallucination requires directors, employees and agents to observe high standards of 1 OFF Dustless Ana personal tenets In ten conduct AT tenet outlets Ana responsibilities e company believes that employees must have a high degree of decorum and should not take unfair advantages, through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or other unfair dealing practices. To achieve these initiatives, the company has established guidelines covering areas such as: legal, ethics and corporate social responsibility. However, in spite of the Meanys vision and business initiatives, the company has faced some legal troubles. One legal trouble that the company has faced took place in September 2001. During this time the company was faced with a lawsuit and was ordered to pay investors one hundred thirty million dollars for misleading investors regarding the companys stock performance. It is evident that this affected the management planning by reducing the financial strength of the company. The website for ethics in business (2009), mentions that another issue that has affected Hallucination is their ethical practice standards. In the early sass the company was found to be in violation of federal trade barriers in Iraq and Libya by selling both countries dual-use oil drilling equipment and sending six pulse neutron generators to Libya. This action drove the company to plead guilty and ordered to pay $1. 2 million dollars with another $2. 6 million in penalties. In regard to corporate social responsibility, Hallucination is a good example of corporate greed. Hallucinations relocation of its headquarters to Dub while maintaining a corporate office in Houston is socially irresponsible. This move is clearly an insult to every American taxpayer who have paid for the companys no-bid contracts and endured their overcharging practices throughout the years. Whats even more alarming is the fact that during the Bush administration, Hallucination was accused of overcharging and contractor waste amounting to $2. 7 billion dollars. Irresponsibility such as this one affects the companys management planning strategies because it no longer controls its assets and looses its integrity. In my mind, some of the factors that influence the tactical, operational, and interagency planning of Hallucination are their lack of leadership, ethics and control. The company has been through so many ethical issues ranging from overfilling taxpayers by $169 million dollars to practicing human trafficking in Iraq. One way of correcting this deficiency is by first recruiting talented people with integrity and leadership skills that will act with the companys best interest in mind. Secondly, Hallucination should implement a process that allows for ethical checks and balances in order to avoid poor decision making thus preventing costly legal issues. Third, there has to be effective internal controls implemented. The company must not only act ethically in their business decisions but should be financially responsible. If the company takes these three simple steps and implements the four factors of management: planning, organizing, leading and controlling it will gain the confidence of its shareholders. It is evident that this company needs to re-commit themselves to their mission and the well being of their customers by practicing ethical and transparent business rules that will benefit the companys overall goal. Doing so will rolling order to tenet strategic, tactical, operational Ana contingency planning wanly will ultimately bring success to the company. In closing, despite Hallucinations policies regarding ethical and corporate social responsibility standards, the company must re-commit themselves to the four factors of management. Their commitment to the oil and gas business should be one without greed. Instead, it should be one that looks out for everyone involved by acting ethically correct.

Relative value securities Essay Example | Topics and Well Written Essays - 500 words

Relative value securities - Essay Example Total operating expenses remain the same, yet total revenues have decreased by a small margin. Another factor to mention is the operating income, which has experienced the same kind of trends. An additional worrying sign is that the fund underperformed the S&P 500 by 2% during the first quarter of 1991. This is in stark contrast to the exemplary performance over the preceding five years. Jupiter Venture was only one of two mutual funds that had outperformed the S&P 500 year on year since 1985. The opportunity to take the Sensormatic offer is an attractive one, but there is no guarantee that Sensormatic would continue to grow at its current pace. Sensormatic is looking to move away from the soft-goods market and turn to hard-goods protection. However, the gross margin of hard-goods EAS systems is only around 30%, which is half of the figure for soft goods. The hard goods market is extremely competitive, and there is no guarantee that Sensormatic would come out on top. Win Smith should close Jupiter Venture and get out while he still can. Although the short-term prospects do not look good for Jupiter Venture, there is no reason to suggest that the company’s long-term viability is under threat. While the income statement and comparative financial data show that the company is stagnating, so are many of its nearest competitors. The boom of the mid to late 1980s is over, and Jupiter Venture needs to reinvent itself to prepare to expand going into the 1990s and beyond. The company’s balance sheet shows an encouraging sign—total liabilities only make up about 15% of the company’s total assets (total liabilities of $12.2 million compared to total assets of $83 million). Jupiter Venture’s total long-term debt is only around half of this figure. This figures show that while the company may take a hit in the short-term, the foundations of the company are strong because it does not rely on debt to finance its operations. Looking at the comparative