Financial audit Essay Example for Free

Financial audit Essay Generally, ethics refer to moral principles and values. Random House Webster’s College Dictionary notes that ethics are â€Å"the rules of conduct recognized in respect to a particular class of human actions or governing a particular group, culture, etc. † An individuals ethics generally define what that individual believes to be right and wrong. Professional ethics are typically expressed by a code of conduct adopted by an organization that represents a profession. Professions adopt such codes to encourage moral conduct among their members. Following is a list of the individuals involved in the AMRE case: Robert Levin, Chief Operating Officer Dennie Brown, Chief Accounting Officer Walter Richardson, Vice President of Data Processing Steven Bedowitz, Chief Executive Officer Mac Martirossian, Chief Financial Officer Edward Smith, audit engagement partner Joel Reed, senior audit manager My experience has been that students differ markedly in their assessments of the ethics of these individuals. In particular, students generally have difficulty arriving at a consensus assessment of Martirossian’s conduct in this case. I believe that the lively debate typically produced by this exercise is healthy for students since such debates allow them to begin developing or fleshing out their attitudes regarding important ethical issues and concepts. 2. The executives involved in the AMRE fraud agreed in a consent order to refrain from violating federal securities laws in the future. In addition, Robert Levin and Dennie Brown forfeited funds they realized from sales of AMRE stock during the fraud. Levin also paid $1. 8 million to the federal government, including a $500,000 fine for insider trading. Finally, Levin and Steven Bedowitz contributed approximately $9 million to a settlement pool to resolve a large class-action lawsuit. Most students conclude that the AMRE executives who participated in the fraud were appropriately punished. Their actions were motivated by greed and self-interest and they paid a heavy price for their indiscretions. The two auditors involved in this case, Edward Smith and Joel Reed, were prohibited from being assigned to audits of SEC registrants for nine months. Again, students typically find that this punishment was appropriate given the apparent mistakes made during the AMRE audits. These mistakes included failing to adequately test the computerized lead bank, allowing AMRE personnel to observe certain inventory sites, accepting client explanations without applying sufficient audit procedures, and failing to require the client to disclose large and suspicious period-ending accounting adjustments in the financial statements. The SEC issued a separate enforcement release criticizing Martirossian for his failure to take appropriate measures upon learning about the fraud. Students frequently disagree with the SEC’s criticism of Martirossian. Many of them view him as an ethical person who just happened to be in the wrong place at the wrong time. It is important to point out to students that it is not unusual for accountants to find themselves in these types of ethical dilemmas. Martirossian’s experience provides an excellent example of the potential consequences an accountant may face if he or she violates the Code of Professional Conduct. 3. Among the alternative courses of action available to Martirossian were the following: a. Aid in the cover up of the fraud. b. Demand that the executives involved disclose the fraud to the auditors. If they refused to comply, report the fraud to the SEC. c. Report the fraud to the auditors and to the Board of Directors immediately. d. Secretly report the fraud to the auditors. e. Resign his position with AMRE, Inc. Probably the best course of action for Martirossian would have been to demand that the executives disclose the fraud to the auditors. If they refused, Martirossian should have considered disclosing the fraud directly to the SEC. This action would have resulted in Martirossian upholding his professional responsibilities as a CPA. Although he may have lost his job, he would have avoided being sanctioned by the SEC. Most important, this course of action would have prevented innocent parties, such as potential AMRE investors and creditors, from being harmed by the fraudulent scheme. 4. The relevant accounting concept in this context was the matching principle. The matching principle requires that expenses be matched with the revenues they produce. A cost can be deferredtreated as an assetwhen it is expected that the cost will produce future economic benefits (generally, revenue). It seems reasonable that a portion of AMRE’s advertising costs benefited future periods and, thus, could be appropriately deferred. Nevertheless, AMRE’s policy of deferring all of the advertising costs related to unset leads was very aggressive and probably resulted in the booking of assets that would provide no future benefits for the company. 5. Listed next are key audit risk factors that were present during the 1988 and 1989 AMRE audits. a. AMREs management had a strong incentive and desire to maintain the companys stock price at a high level. b. AMRE’s unset leads increased dramatically during 1988. c. The company’s inventory also increased significantly during 1988 and increased much more rapidly than the company’s sales. d. The efforts of AMRE’s executives to influence important audit planning decisions should have been of concern to the auditors. e. The percentage-of-completion accounting method was an unusual method to apply to AMRE’s installation jobs since those jobs typically required only four to ten days to complete. f. AMRE had several large and unusual fourth-quarter adjusting entries in 1989. . Martirossian’s secret meeting with the AMRE auditors should have caused them to question the integrity of the client’s financial statements. When taken together, these items suggest that the overall audit risk for the AMRE audits was relatively high. Most of these risk factors were discovered by Price Waterhouse or were apparent to the audit firm. For example, the audit planning memo for the 1988 audit identified the large increase in inventory as a key risk factor and called for an increase in the number of inventory observation sites. Likewise, the AMRE audit partner originally requested that the company disclose the large period-ending adjustments in its 1989 10-K. Although the auditors identified these risk factors, it appears that they failed to adequately consider them during the performance of fieldwork. For example, company executives convinced the auditors to allow client personnel to observe several of the inventory sites selected for observation at the end of 1988. During the 1989 audit, client management persuaded the auditors not to require disclosure of the large fourth-quarter adjustments in AMREs financial statements. Why did the auditors apparently defer to AMRE’s executives in several situations and fail to adequately question their decisions in others? Possibly, the auditors simply succumbed to client pressure in each of these instances. During the 1989 audit, the auditors may have relied too their detriment on Martirossian, a former colleague, to inform them of any major problems in AMRE’s financial statements. Whether Price Waterhouse was justified during the 1988 audit in agreeing to allow client personnel to observe the physical counts at certain inventory sites is a matter of professional judgment. Apparently, members of the audit team did not believe that the client’s request posed a major problemthat is, did not result in a material scope limitation, otherwise they would not have agreed to it. Client management should not be allowed to influence key audit decisions such as sample size determinations, assignments of auditors to given areas of the audit, and the types of audit tests applied to specific accounts. Generally, any time a client request would prevent an auditor from satisfying the requirements of the third standard of fieldworkobtaining sufficient competent evidential matter to support his or her audit opinion, that request should be denied. 7. In most situations, the key management assertion for an expense item is the completeness assertion. That is, auditors are generally concerned that a client may attempt to understate expenses. However, in this case the fourth-quarter write-offs in 1989 were initiated by AMRE management. When management voluntarily recognizes a large and unusual expense item, an auditor may want to consider the possible motives underlying management’s decision. Certainly, an auditor in such a case will want to investigate the completeness assertion, but the existence/occurrence assertion should also be examined by the auditor in such circumstacnes. In recent years, many large firms have taken â€Å"big bath† write-offs to improve their chances of returning to a profitable or more profitable position in the near future. In fact, the management assertion of most concern to Price Waterhouse regarding the 1989 fourth-quarter write-offs may have been the â€Å"presentation and disclosure† assertion. This assertion â€Å"addresses whether particular components of the financial statements are properly classified, described, and disclosed† (AU Section 326. 08). The large year-end adjustments that resulted in AMRE reporting a net loss for 1989 were clearly not adequately described in the company’s financial statements. 8. Listed next are the key responsibilities an auditor assumes for quarterly financial information included in the footnotes to a clients audited financial statements. Refer to AU Section 722 for a more detailed discussion of these responsibilities. a. The auditor should apply â€Å"review† procedures to the interim financial information. (Such procedures consist principally of inquiries of client personnel and analytical procedures. ) b. The auditor should ensure that the quarterly data are presented as supplementary information and that each page of the data is clearly marked as unaudited. . If the results of the review procedures are satisfactory, the auditor does not need to modify his or her report on the audited financial statements to make reference to the review of the interim financial information. However, if the interim financial information does not appear to be in conformity with generally accepted accounting principles, including adequate disclosure, the auditor’s report should generally be expanded to address this issue.

Tension in Do Not Go Gentle Into That Good Night Essay -- Do Not Go G

Tension in Do Not Go Gentle Into That Good   Night  Ã‚   Dylan Thomas’s poem "Do Not Go Gentle Into That Good   Night", is an urgent plea from Thomas to his dying father, and all men not to give in to death.   Thomas uses himself as the speaker to the make the poem more personal.   The message of the poem is very inspirational.   Throughout the poem, Thomas uses different imagery and language to illustrate the tension between action and inaction.   The first stanza helps summarizes the meaning of the poem, urging old men to fight death.   In the first stanza of the poem Thomas uses assonance, †Old age should burn and rave at close of day; / Rage, rage against the dying of the light.† (2-3) The use of age in the second line, and rage twice in the third depict assonance.   Here Thomas is trying to disprove the notion that old age is a time to rest, and a time to look back with wishful regrets on one’s experiences. The middle four stanzas are examples of various types of men, their trials of life and the whisper of death upon them.   In ...

Laptops in School Essay

Power on the new paper of the future. Students should be able to have a laptop for schoolwork instead of carrying a binder and using paper for everything they are assigned to do. First of all, homework would be more fun to do on a laptop. Students would be able to put more detail into their work as well as show their personality because of all the features and applications within a computer. Paper assignments on worksheets and bookwork don’t provide this opportunity. This would be fun as students would to be able to create, answer questions, and study if students had the access a computer brings. Secondly, students will find that turning in homework on time is easier with a laptop than traditional paper assignments. A college student said,† Using laptops will help students with their grades. † Once a student completes the assignment, he or she can simply email it to the teacher. Students will not have the excuse of losing the assignment, forgetting it or having a dog eat the homework. Using paper means cutting down trees. Laptops should be a student’s friend. Statistics prove a third point. Statistics show that using laptops in school increases students’ grades. Going more in depth in assignments is what students will do if they have laptops. Also, students have a better chance of turning in their work and therefore grades will improve. Teachers and parents continue to complain that grades drop because students are lazy and don’t remember to turn in homework when it is due. Statistics also show that today’s teens are so involved in every aspect of technology, they would embrace the opportunity to simply use their skills with computers and homework. A student at Brigham Young University who uses his laptop daily, said, â€Å" Laptops are required in college. When using laptops, assignments can be graded quickly because of automated grading done by the computer. Turning in homework through a computer would allow quicker feedback to students. The quick feedback would allow a teacher to see what students are struggling with. Plus, a laptop is better than using paper. Paper is a waste of trees. † About 144,000 trees get cut down each day. Cutting down trees is what is done to get paper. The less trees we have, the less oxygen we have. Finally, laptops will reduce that cutting down of trees in the future predicting a longer life for the earth. In college it is required for students to have laptops. So why not start using laptops now? Most of the work we do in middle school and high school is for college and life after college. The laptop will become a student’s best friend, mentor, helper, and environment saver.

Essay on “Reorganization of team structure in Cutting edge LTD”

Essay on â€Å"Reorganization of team structure in Cutting edge LTD† Perhaps, Cutting edge limited is a UK based company, which started three years ago, the company deals with manufacturing and distributing tennis racquets. It has rapidly expanded rendering the management of its operations a challenge. In order to improve the company’s profitability and efficiency, the reorganization of its team structure is deemed necessary owing its rapid growth. Re-organization of team structure revolves around arranging of the workforce and their various jobs in line the company’s goals and objectives. Initially, when Cutting edge limited was small, communicating face-to-face was easier and formal team structure. However, in its present large size, plans have to be made about allocation of different tasks in order to improve the company’s efficiency and profitability (Dent Galloway, 1999). In most cases, reorganization of team structure causes layoff in an organization. One of the objectives of reorganization is reducing payroll overheads. Others involve outsourcing, absorbing acquired or merged entities, increasing efficiency, and management’s wish for change. In a reorganization, not just jobs change, be outsourced, outplaced, but jockeying for position transpires; new associations are required, and the mental challenge of the revolution itself sluggishness almost everybody in the company. During the initial stages of Cutting edge limited, there are set of standards were made in line with the commitment towards total quality service. Values were set from the beginning, and now with the company’s big size, the increasing competitive and turbulent business environment Cutting edge limited has to re-organize its team structures in order to improve its efficiency and its operations and consequently increases its profitability (Brews Tucci 2004). The main issue now with Cutting edge limited relates to the growth of the business: owing the business size it happens to be much more complicated to coordinate the operations, to meet customer’s expectations, to uphold efficiency and to manage employees. The management should find out a resolution to address all problems associated to the present size of the company. The source of those problems was business growth so the way out is to reorganize the team structure of Cutting edge limited into various Strategic Business Units. Dividing the business into various business units will make easier to manage the efficiency of all the business units. Not just that but the various units will be more flexible and thus let them improve the response of the expectations of the customer. In addition, this reorganization will enhance the management of the workers (Dent Galloway, 1999). The management of Cutting edge limited should not end here after reorganizing the team structure of the company activity into various business units. But should go further and transform on how workers are delegating tasks inside those various business units. As an alternative of arranging structure in a hierarchical manner, the management should opt to put into operation a team approach to achieve the objective of the company. By doing this the management will be transferring the leadership responsibilities from the managers to the workers enabling them to have sound decision making power which will lead to an increased workforce responsibility and accountability. These transformations will motivate the workers to find out innovative solutions for their tribulations in stead of  waiting the management to chip in for the solutions. Team restructuring enables the workforce to be task oriented and hence all employees will participate in search of various solutions when problems occur. Engaging all members of the team will be more productive other than leaving it to a manager to give solutions. Team restructuring will enable Cutting edge ltd to deliver tennis racquets in time, this will enhance satisfaction of customers. Consequently restructuring will reinforce teamwork among employees by including all members in finding ways of delivering tennis racquets efficiently (Cameron, Kim Quinn 2006). Furthermore, the company has to form groups called â€Å"superteams†. These groups will be self managed and will be under minimal supervision from the management of the company. These groups are to be more inventive and have a quality and speed as compared to the normal teams. Again, such teams will directly be concerned in solving issues arising from the company. This will save a lot of time and expenditure and thus enhance the company’s profitability and efficiency. Summarily, reorganizing the business into various units will promote the quality of services offered by Cutting edge ltd. Moreover, forming the self-managed groups will allow cutting edge ltd improve the quality of its services, profitability and efficiency. This will be realized through utilization of all the employees’ creativity and skills and again by motivating them (Cameron, Kim Quinn 2006). The self-team will be more beneficial as compared to the normal teams in that, their leadership is within. The fact that team members are engaged in making their own decisions, they therefore, have a sense of belonging and possession within their various tasks. They will also feel satisfied for the outcome of their decisions. Although, there are direct impacts on the outcome due to the fact that the decision was as a result of working as a team and so the probability to have sound decisions are high nevertheless an indirect impact will also be realized owing the team members participation in the process of making decisions. For instance when an individual participate in the process of making the decision, it will be more probable to struggle for proper implementation, as opposed to implementing a solution which he/she was never involved in making (Galbraith Jay 2002). In team restructuring, the responsibilities of group members can be interchanged. This will make the business capable of harvesting much more from its workers potential; above all, the workers will be much more encouraged. The change of tasks gives workers a chance to perform new tasks, acquire new skills and hence avoiding boredom. In a restructured team, work effort will be unified as opposed to unstructured team. This unified effort will enhance team results since an individual work effort where an employee focuses on his own task without involving other members will yield lesser outcome. This way, team members will be able to appreciate their achievement and thus feeling motivated. In Cutting edge ltd, the team restructuring will attract a bigger number of workers to participate in quality production and delivering of tennis racquets and hence customer satisfaction (Brews Tucci, 2004). After team restructuring, the management of Cutting edge ltd should create a job-secure environment in order to keep the team members involved and motivated. In fact, the company would have created a conducive environment for work where employees will participate. A right working environment is that which will involve all members hence avoiding failures and mistakes. To support the team restructuring, the company management should reward and recognize those members and teams who excel in their various duties. This award will motivate employees by recognizing them and by promoting competition amongst the teams.  The team restructuring will enable managers be facilitators, this will motivate workers perform their respective duties and participate in the process of solving problems. Managers of Cutting edge ltd should empower employees by letting them make appropriate changes necessary in improving customer satisfaction and productivity of the company (Galbraith Jay, 2002). Team restructuring will also facilitate the aspect of power transfer to team members from the management. This will give room for transfer of responsibilities towards the team, which makes them enjoy the outcome of their decisions. By doing this Cutting edge ltd management will improve the effectiveness of all the team members since teams were liable for the outcome and also the inspiration among workers is improved owing the responsibilities and power transfer. The management will also assist employee’s effectiveness through goal setting procedure. As opposed to unstructured team, the responsibility of  management in team-restructured system is to lay attainable and clear goals always utilizing ideas and input of the members. These ideas and input become more significant after goal setting since the workers are the ones giving the solutions to attain the goal. In addition, cutting edge ltd management should act on the best suggestions from employees. As opposed to the unstr uctured team system where the management both sets the goal and give solution required to attain certain goal. The team restructuring in Cutting edge ltd will allow managers to have a role in facilitating the setting of goals, on the other hand, solution finding is typically a team task. In order to uphold team motivation and effectiveness the manager of the company should give coaching and feedback process to the whole team and not an individual (Birckley Jim, 2003). The role of a manager after team restructuring is more of facilitation than management. The managers have the responsibility to creating the most favorable work conditions so as to have members of the team prepared to take roles to work competently and solving problems on their own. It is important that when implementing team structuring, key people must be involved; this means the executives and other upper-level management whose processes and workers will be influenced by the restructuring. For example, if a new technology is to be introduced in the business, the key people should not be just top management, but lower-level managers who also oversee the workers use of the introduced new technology. A diverse set of key people should be concerned in minimizing the cost of introducing the technology. Developing a plan for successful implementation of team restructuring is vital. The developed plan should assist to describe the responsibilities of the key people concerned where as also laying out short-term as well as long term objectives for the restructuring (Birckley Jim 2003). The management of Cutting edge ltd should uphold the plan for implementing team restructuring; the management should follow up on the plan it lays. This will make the rest of members of the team adapt to the team restructuring. If the management of the company fails to offer the necessary support for the plan to be applicable, it is unlikely to be successful. The management’s communication with workers on what is happening, why the team restructuring are being put in place, and how they will implement is vital. Since team restructuring can cause a lot of fear, better communication can be employed to cool down workers and give confidence to their continual support. In addition to improved communication, the management should consider any communication from the members. They ought to be accessible to act on suggestions or respond to questions that workers may have. Creating chances for member’s feedback like having an open-door management policy or holding meetings may su ccessfully facilitate team restructuring. Team restructuring in Cutting edge ltd may encounter various pitfalls; the management of the company may be attracted by the simplicity and power of the restructuring process, but then the process of putting in place is extremely expensive and time-consuming. The process requires a substantial amount of money and other resources to put in place the team restructuring. Another challenge is the differing perceptions of members of the team: The idea of teamwork differs among cultures, employees from diverse cultures will, in all possibility, portray a team’s membership criteria, objectives and activities in extremely dissimilar terms. This diversity will make it hard to institute the root cause of a problem, which may be within the team members since it’s hard to differentiate between personal and cultural factors. This makes team restructuring and problem solving more cumbersome (Birckley Jim 2003). The reorganization of team structure may faces resistance from some of the employees. The restructuring can cause some employees uncomfortable in executing their duties, their relationships with managers and coworkers and in their areas of expertise. Even when employees are not very contented with the present workplace and consequently welcome the restructuring, they may find the process to be demanding. Helping workers foresee difficulties and notifying workers of how these pitfalls will be dealt with can be a basis of comfort to them. When Cutting edge ltd proposes major team restructuring, those implicated will begin to be anxious on how the process will change their responsibilities and the required skills. The most thriving employees of a company may feel endangered since they are good performers under the old structure of the company. Some regular worker reactions to team restructuring include denial, confusion, anger and loss of identity. Such resistance is not only experience d among workers but also executives and managers may be prone (Birckley Jim. 2003). Team restructuring is personally a taxing issue for everybody affected; nevertheless, it is beneficial to the entire company in the long run. How the management reacts to workers resistance can decide the fate of the business. For instance, a sense of confusion by the employees, which is habitually represented by continuous questioning from employees and/or management — typically implies that not sufficient information, has been offered. This is a chance to convey supplementary information to workers, such as repeating the big picture and the reason the corporation is working so hard to redefine its business culture. This is also an opportunity to give assurances that the administration is going to address their concerns of the employees (Galbraith Jay, 2002). Another common challenge/pitfall facing the restructuring process is denial or doubt that actual reorganization will take place. This reaction takes place sometimes since workers will not want any alteration in their tasks they are used to, and in other times they do not trust the administration is fully dedicated to the idea of restructuring. In any case, the feedback also signifies an opportunity for administration to recognize issues that may perhaps be present transversely in the business and address them. The employees can also bring administration and higher-ups the attention that the actual reorganization of team structures is not consistent with the framework that was put in place. A probably related feedback is anger, sometimes goes together with attempts to sabotage the management efforts to reorganize. Once more, there can be advantages to this kind of behavior. Workers who so obviously make their feelings recognized let managerial leaders in on which hindrances to restruc turing are probable to take place, and administration can then devise methods to address them. It also encourages negotiation with other employees (Brews Tucci, 2004). Another pitfall is the fact that employees who believe themselves experts or specialists in a certain field are frequently asked to begin, for example, operating in a dissimilar functional field or employing different technology), when business make cross-training be among their goals. Again, this intimidates the comfort zone for numerous workers at all levels of the business. Having demonstrated themselves once, they are still ordered to do so repeatedly. In order to relieve these fears, administration needs to persuade employees to take initiative, ask questions, and take risks. Fear of not a succeeding is perhaps one of the strongest grounds for opposing restructuring (Miles, 2003). Companies that anticipate reorganization will be embrace need to analyze failures and risks as tools in which the business can learn and expand. Accordingly, resistance ought to be discouraged, whereas management will feel it is most significant to put in place a positive spin on the whole thing, business management will realize that demonstrating their own concerns on the team restructuring of the company assist other employees to deal with their concern (Galbraith Jay, 2002). It also offers them a chance to instruct others on how to discover best practices in ordinary circumstances, and to let workers know they understand their concerns. Resistance is another challenge of reorganization of team structure; this affects employees and managers equally when the process is put in place. Resistance is a phenomenon, which occurs naturally and can easily be tackled in a constructive approach. In this respect, resistance is an indication of a radical transformation in the reorganization of team structures. Management can be of assistance by foreseeing common reactions and utilizing them to their best benefit. For example, if a member of staff is able to make requested transformation to his performance but not keen to do so, some compromise may be all that is necessary to convince that individual to follow along with the new direction of the business. For those who opt for transformation but lack various basic skills, intended training could be required to suppress the fears of those individuals. Whatever the conflict a company encounters, it is almost an assured part of transformation, which is a continuous in the business setting. Globalization of markets and rapid innovation in technology, a company cannot afford to relax on its success (Miles, 2003). In conclusion, reorganization of team structures in Cutting edge ltd will assist significantly in the effective manufacturing and delivering of tennis racquets. The process will enable the company to manage the challenges and pitfalls associated with its full grown size. Team restructuring will transform the entire operations of UK based Cutting edge ltd hence increasing the profitability, efficiency and