Issues in Auditing and Professional Practice

Only available on StudyMode
  • Download(s) : 206
  • Published : August 11, 2012
Open Document
Text Preview
Issues In Auditing and Professional Practice

ASSIGNMENT QUESTIONS
The questions in this assignment are extracted from the text book for this paper; Reference: Johnson, R. (ed), Readings in Auditing Volume 2, John Wiley & Sons Australia, 2007. Answer the following 4 questions:

Question 1: (Chapter 10 “Australian Wheat Board”, p135 Question 4) Discuss the lessons to be learnt from the AWB scandal.
Question 2: (Chapter 12 “Fraud prevention and detection- further guidance”, p158 Question 3) Explain the role internal controls and code of conduct play in preventing and detecting fraud. How effective are internal controls and codes of conduct in preventing and detecting fraud? Explain your answer. Question 3: (Chapter 14 “Audit Committees: Effectiveness and diligence”, p187 Question 4) Discuss the following: “If one aspect of the three- legged stool is ineffective, financial statements will cease to be reliable”. Question 4: (Chapter 16 “Further guidance for audit committee to fulfil their responsibilities: Override of controls and internal auditors”, p213) Advise an audit committee member on how to detect management override of controls.

TABLE OF CONTENTS
Page

TITLE PAGE………………………………………………..1

ASSIGNMENT QUESTIONS………………………………2

ABSTRACT ...……………………..………………………...4

QUESTION 1……………………………………….…..........5-7

QUESTION 2…………………………………….………….8-10

QUESTION 3 ………………………………………………..11-12

QUESTION 4…………….……………………………..........13-14

APPENDIX 1………………………………………………15-17

APPENDIX 2……….. ………………………………………18-19

REFERENCE LIST…………………………………………20-21

ABSTRACT

We all drive better when there’s a policeman behind us. Given a chance, we all break speed limit rules, stop where we’re not supposed to and for the more daring – go through a red light. We all consider different risks are less offensive than others and some are willing to take chances others would not even contemplate. Is this a question of morality or being smart? Is smartness driven by greed or is it a matter of testing one’s ability to soar and succeed and seeing how much they can get away with without being caught? I would argue that it has to be driven by some form of self gain or the motivation would be lost. Certainly this was the case in the Enron scandal. Ethics would say that as long as no harm is done to others then it is fine. Law would look further to see if the “intention” behind an action is to deceive even if no harm was done up until that point. Therefore, the law is there to curb the “temptation” for doing things that could possibly cause harm to others.

Most laws are reactive rather than proactive as they are only established when there’s a breakdown in a presumed ethic or social responsibility. Section 404 of the Sarbanes-Oxley Act 2002 is a section that helps detect and prevent fraud from happening; however it has taken several major company collapses and losses to thousands of investors for this law to eventuate. This section is not an end to all fraud however as it has been recognised that “governments cannot legislated against corporate collapses or for corporate integrity” as the former ASIC chairman David Knott said in the article published by The Australian Financial Review on July 18th 2002.

As efficient as section 404 may now appear to be, it would be ineffective if the methodologies change. For example, the introductions of CDOs and their complexities appeared reasonable at first. It wasn’t until all the flow-on effects of years of subprime lending that the effect of such dealings showed its flaws. As the status quo changed and accounting rules changed to fair value accounting the basis of the structure upon which the idea of CDOs was built on changed resulting in endless consequences. The “intentions” of such schemes as the world came to know was greed – a trait that does not sit well with ethics. Now the world is paying the price.

Is this judgement day for the world to...
tracking img