3. What internal processes or systems do you recommend to prevent fraudulent practices such as those present at WorldCom? Why were these practices not detected sooner? The internal audit department should have been required to report directly to the Board or CEO, and not to the CFO. I also think that the internal audit department should have had full access to the accounting system.
- Compliance Department (1,2) Why: A bank should ensure a strong compliance culture throughout its organization, where the board of directors and senior management set the right tone. The board of directors and senior management (including Head of the business and Supervisors) should set a clear risk appetite and ensure a compliance culture where financial crime is not acceptable. The Third Line of Defense helps the Bank to accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. How & Who: Develop policies for periodic internal audits (5) covering: Adequacy of bank’s policies, procedures and controls identifying key risks, addressing the identified risks and complying with laws, regulations and
This also includes establishing a private-sector regulator to oversee the auditing profession to combat accounting fraud, and enhancing financial disclosures. Companies are under more pressure to comply with SEC and Sarbanes-Oxley Act after recent and growing concerns about their ethical behaviors. Role of Ethics and Compliance in the Financial Environment Starbuck’s role of Ethics and Compliance in the financial environment applies to the Chief Executive Officer (CEO), Chief Financial Officer (CFO), comptroller, and other financial leaders. The company’s code of ethics encompasses
The authors explore the ideas of collusion in the workplace and the controls put into place to avoid collusion. They analyze what could go wrong and the motivations and opportunities that are available to allow collusion to be executed in corporations. The author outlines the control efforts that are put into place as the redundant and compensating controls and notes there are more than just one preventative measures in place. By having more than one check point the controls have a system that not only prevents collusion but can also detect the presence of collusion. This source is relative to my paper discussing auditing collusion because it discusses collusion as a whole in a corporation.
Materiality is defined by the FASB as an omission that would affect a normal person by a misstatement such as using earnings management to skew the true earnings or revenue. This calls in to play the unethical behavior that earnings management places on the public (violating AICPA Code of Professional Ethics). SOX further required management and accountants to be cognizant of the material errors that financial misstatement and false reporting could have from an ethical standpoint. It holds them accountable for all financial reporting from their company. This includes criminally and financial accountability.
Managerial Accountants should calculate net income or loss in a manner that accurately reflects the closest true costs and profits as determined by the International Federation of Accountants (IFA). To effectively help Management Accountants do this, the IFA has set in place a code of conduct that should regulate the integrity, competence, confidentiality, and credibility of a corporation. Introduction To fully understand the ethical issues of Managerial Accounting, you must first assess the difference between Managerial Accounting and Financial Accounting. Financial accounting is used for to present the status of the company to external sources such as board of directors, investors, auditors, and for reporting purposes as well. The financial side of accounting is used to represent the company’s current standing based on the past profits, net income, bad debts, and current ratio of assets to liabilities.
The presence of independent directors in an audit committee ensures compliance with the standards and statutory requirements and accordingly the issuance of unqualified audit report (Carcello and Neal, 2000). The independence of an audit committee is expected to be reasonably compromised if the audit committee is not solely composed of independent directors (Bronson etal., 2009). Using this reasoning the quality, competence and independence of an audit committee is reinforced by non affiliated directors who will monitor the financial reporting process (Choi etal., 2004) and reduce information asymmetry (Beasly and Salterio 2001). However, an audit committee which is fully comprised of independent directors improves earning informativeness and accordingly (Woidtke
The board’s action depends on regulations, laws and shareholders in general meeting. The auditor's role is to supply the shareholders with an objective and external inspect on the directors’ financial statements which form the foundation of that reporting system. The objective of the audit Committee is to raise the standards of corporate governance and the level of confidence in financial auditing and reporting by indicating obviously what it sees as the respective liabilities of those involved and what it believes is expected of
Agency problems. Who owns a corporation? Describe the process whereby the owners control the firm’s management. What is the main reason that an agency relationship exists in the corporate form of organisation? In this context, what kinds of problems can arise?
What are agency problems? * Occurs when managers act in their own interests and not on behalf of owners (stockholders) What is corporate governance? Corporate governance is the set of rules that control a company’s behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community. d. What should be the primary objective of managers? * The primary objective should be shareholder wealth maximization.