In addition, much of the new assignments are given to untrained professionals with strict completion deadlines. Because of such dilemmas the auditing firm has been faced with the ethical dilemma of whether to assist with the accounting issues at MHA and NYH. As a professional in accounting I have agreed to terms of independence. By confirming to such terms, I must not issue any non-audit services. As the auditor of both MHA and NYH, according to Sarbanes-Oxley Section 201, I am prohibited most non-audit services to public audit clients.
Which unfortunately is not much mentioned in both the code of conduct documents. Even when it’s mentioned it isn’t that clear for example in the second principle of Brisbane City Council’s Code of Conduct on section (ii) Public Money section it says “You must maintain high standards of accountability if you collect and use public money.” The sentence of high standards is very unclear and absurd and in the first principle on section (vi) on accepting gifts and benefits it says, “Occasionally you could be offered gifts or benefits from people with whom you do business. You can accept gifts or benefits in certain circumstances, however you must not accept any gifts or benefits if there is a possibility that in doing so, you could create a real or perceived conflict of interest. For example, ask yourself if accepting the gift or benefit could suggest that the giver may or would receive favorable treatment. Your supervisor can advise you about the receipt of gifts, gratuities and benefits.” Again it’s absurd and unclear, it doesn’t mention
The loophole employed by Enron has since been plugged by the Sarbanes-Oxley Act, however, the external auditors’ failure to exercise professional judgment in relation to such dealings reflects poorly on the effectiveness of their audit practices. The external auditors’ inability to recognize the nature of these special entities and the transactions being entered into by Enron prevented the auditors from recognizing them as part of the larger Enron economic entity. As a result, revenues were significantly overstated while liabilities were
Identify the needs of the stakeholders in this case study. The needs of the taxpayers would be that they would rely on income and financial support from having an investment in the business. In this case the taxpayers own 83% of RBS and 41% of Lloyds demanding for an increase in the value of their investment. Tax payers may withdraw their share of the company if the actual or projected financial return is no longer profitable for them. Identify the possible causes of conflict which may arise in this situation.
The board of directors is responsible for overseeing and exercising corporate powers and certifying the company’s business affairs while managing the goals and objectives for long-term interests of the shareholders. Organizational Annual Report and SEC Filing The SEC requires publically traded companies to file annual financial reports, and these reports are open to the public. Investors are interested in these reports because it helps in determining the financial health of a company. As a means for providing guidelines, principles, and objectives for the financial markets in the United States, the Sarbanes-Oxley Act of 2002 enhances the SEC’s roles for reforming corporate accountability. This also includes establishing a private-sector regulator to oversee the auditing profession to combat accounting fraud, and enhancing financial disclosures.
From an accounting prospective, the major problem with the calculations mentioned in the article is determining the rate of return and length of the marketing investment. While the initial value of the “investment”, i.e. marketing expense, can be easily determined, determining the real value after the investment has been made has the potential to be biased without a commonly used measurement. The value of the investment could also fluctuate from year to year based on the companies’ profitability even though marketing had not direct
Enron Corporation 1) Describe how Enron could have been structured differently to avoid such activities. The law required Enron Corporation to describe its party transactions to shareholders and the member of the investing public in numerous of different disclosure documents. Enron withheld information that were disclosed which ultimately was important for understanding the meaning of transaction. They disclosed that there were large transactions that the CFA had interest. Enron Corporation did not give the CFO’s factual or expected benefits from these previous transactions or provide financial statements in its entirety.
Mark has several options as auditor for Surfer Dude, Inc. Substantial doubt will result in an unqualified audit opinion. An explanatory paragraph regarding the uncertainties is explained to reveal the auditors conclusion. "If the auditor concludes that the entity’s disclosures with respect to the entity’s ability to continue as a going concern are inadequate, a departure from generally accepted accounting principles exists." (Boynton & Johnsonp.907) Mark may also state an adverse opinion to reflect a departure from GAAP, or he could disengage himself from the audit.
A promissory note must state a due date. This note does not meet the requirements of negotiability under the Uniform Commercial Code or UCC. There are a few standards under the code that are not met to make this a promissory note. First, the form does not state the name of the payer. The form also fails to provide a specified time for the sum of twenty thousand dollars plus seven percent per annum to be paid.
The main argument of the paper, “Why Good Accountants Do Bad Audits”, is that the provisions of the Sarbanes-Oxley Act (SOX) of 2002 are not sufficient in fixing the problems with the U.S. system of auditing. While SOX aims at eliminating conscious corruption, the authors attribute the problem to unconscious bias, the idea that auditors unknowingly discount facts that contradict the conclusions that would benefit them and embrace evidence that supports their positions. The paper discusses three structural aspects of accounting and three aspects of human nature that create opportunities for bias. Each of these aspects influences the judgments auditors make and can lead even the most honest auditors to unintentionally distort the numbers in ways that mask the company’s true financial position. With these aspects in mind, the authors offer recommendations that would limit the effects of biases including full divestiture of consulting and tax services, prohibit auditors from taking positions with the firms they audit, removing the threat of being fired, and educate auditors so they understand how and why biases effect their decisions.