The Sec 's Influence On Auditing A Private Company And The Essential Activities Involved

The audit profession is a relative new comer to the accounting world. The Industrial Revolution, with the growing business sector, was the spark that resulted in auditing techniques being sought out and utilized. Initially, audit techniques and methods were adopted by companies to control costs and detect fraud, which is more closely aligned with internal auditing. However, the need for mandatory oversight of public companies was recognized after the great stock market crash of 1929 (Byrnes, et al., 2012). This brought about the Securities and Exchange Act of 1934 creating the Securities and Exchange Commission (SEC). At that point, the SEC was tasked with

This paper will address the Securities and Exchange Commission’s rationale for charging Cardillo executives with the violations outlined in the case study and identify who was in violation or compliance with the AICPA’s Code of Professional Conduct and the reasons they were or were not complying. This paper will also analyze the actions taken by Cardillo’s outside auditors, evaluate the level of efficiency of the audit risk management, determine whether or not the five components of internal controls were being properly followed and argue for or against whether auditors have a responsibility to assess the judgment of the decisions made by Cardillo’s management.

Smackey’s Dog Food Inc is a privately owned company and does not adhere to the practices of the SEC regulations. The financial statements and accounting standards have to comply with the Generally Accepted Accounting Principle (GAAP).

In the United States, the 1934 establishment of the Securities and Exchange Commission (SEC) ensures that reliable and complete financial information is available to investors (Hoyle, Schaefer, & Doupnik, 2013). Since its formation, “the SEC has administrated rules and regulations created by a number of different congressional actions” (Hoyle et al., 2013, p. 552). Nonetheless, external auditors were not regulated and conducted both audit and non-audit (i.e., consulting) services for the same organization; thus, creating a conflict of interest. Moreover, board of directors were not

Smackey Dog Foods, Inc. is a familiar story in terms of small business start-ups. They started in a family kitchen, experienced explosive growth, and have had some troubles handling the accounting and business side of the business. My firm, Keller CPA’s, does not have specific experience with auditing a dog food manufacturer, but we certainly have a good bit of experience with similar small business accounting and auditing issues.

Internal controls are regulated by the Sarbanes-Oxley Act of 2002. This act assigns responsibility for a company’s internal controls on its executives and directors (Kiesco et.al., 2008). This assignment of responsibility forces the company to use effective internal controls by making a certain group responsible. The act also established the Public Company Accounting Oversight Board which regulates the activities of auditors. Together, assigning responsibility and defining the standards of auditors, the Sarbanes-Oxley Act of 2002 helps to safeguard a company’s investments, assets and future successes by discouraging fraud and theft.

 Audit Process 2-3 Chapter 02 - Financial Reporting and Analysis   Generally Accepted Auditing Standards Auditing Procedures Audit Report Types of Audit Qualifications ―Except for‖ Qualification Adverse Opinion Disclaimer of Opinion Analysis Implications from Auditing Analysis Implications of the Audit Process Audit Risk and Its Implications Analysis Implications of Auditing Standards Analysis Implications of Auditor Opinions Analysis Implications of Explanatory Language for Uncertainties Analysis Implications of the SEC Appendix 2B: Earnings Quality  Determinants of Earnings Quality Accounting Principles  Income Statement Analysis of Earnings Quality Analysis of Maintenance and Repairs Analysis of Advertising Analysis of Research and Development

The purpose of this research is to provide a summary outline on internal auditing by uncovering motives behind corporate fraud, executives greed for power, money and influence. These issues will include a transitory story of the Archer Daniels Midland Company (ADM) scandal which results in fraudulent corporate practices using the fixed pricing scheme. If internal auditing practices were implemented at ADM may have saved investors and customers millions of dollars. This topic shifts to company responsibilities for employing internal auditing practices and managers’ duties to uphold integrity over a decade Sarbanes-Oxley Act of 2002 has been prescribed. This paper ties in the connection between internal auditing and management by flowing into managerial accounting processes.

Sarbanes-Oxley Act has improved the quality of public company audit. SOX prohibited services to try and make auditing more independent. SOX added the role of the audit committee. SOX created the PCAOB. SOX instituted Sec 404 which gave management the responsibility of having to evaluate internal controls.

Title I increases the oversight and authority over public accounting firms which was lacking before SOX was enacted. The public accounting firms were able to focus in their own interest rather than public interest since there is no law enforcing them. The routine inspection for public accounting firms and the threat of any wrongdoing publication will keep the firms to act at their best behavior. The inspection will catch their wrongful doings before it is too late to recover. The individual auditors will reconsider before they commit any frauds as they might not want to face fines or CPA licenses revocation.

On December 15, 2015, the Public Company Accounting Oversight Board (PCAOB) posted new final regulations that require auditors of public companies to disclose the identity of the engagement partner on each audit, as well as information on other accounting firms that participated in each audit (PCAOB 2015). Although the new Audit Standards seem to be perfectly reasonable and relatively low in cost, they obviously will impose a certain workload on accounting firms, which will translate into certain additional costs. So who pays for this? Not the PCAOB, of course, but the accounting firms, who will no doubt pass these costs on to their clients. In this paper, I will analyze the impact of PCAOB’s new audit standard on regulators, financial

All not-for-profit and governmental organizations are all required to prepare financial reports that will be utilized by the external parties. It is significant to note on the preparations of all statements required from the governmental and not-for-profit organization a private auditor produces a mandated a statement also. A private auditor report is deemed as the financial audit. The object of the auditors’ report is to determine that all financial statements are presented completely and represented in an impartial manner. When the term fairly is utilized it is to enforce the accounting practices followed by the generally accepted accounting principals. The report from the external auditor is to describe their standpoint of the fair representation within the financial statements. A key element the auditors’ provide for financial statements is the assurance adequacies of misstatements are not present. It is noted that the external auditors report is not utilized for the purpose of confirming that the financial statements are clear of mistakes or fraudulence.

The objective of the research is to establish whether the auditor has a role to play in ensuring good corporate governance. If an auditor has, what possible stumbling blocks will interfere with his role of ensuring good corporate governance .The research will increasingly look at the issues of fraud and white-collar crimes in corporate governance of a company? That is, what responsibilities do an auditor has in detecting fraud and white-collar crimes. The research will focus on much selected firms in various industries. The objectives cover to assess the role of auditors in corporate governance, detecting fraud and white-collar crimes to be more specific.

Amidst all the debate over corporate governance and the board’s supervision of internal control mechanisms, surprisingly little attention has been given to the role of internal audit, and particularly to whom it is ultimately responsible. While several high level reviews by regulators and others have acknowledged that the internal audit function and the oversight of internal controls has become an important responsibility of boards, the implications of this for internal audit have not always been followed through. Thus in the US, the Sarbanes-Oxley Act of 2002 makes no mention of internal audit, or of any equivalent role other than the board’s role generally in the preparation of the accounts and the setting of accounting standards.

Internal auditing as an important part of auditing supervision system attracts significant attention in currently business environment, especially after several accounting scandals such as Enron and WorldCom. With the continuous improvement of business environment and regulatory requirements, internal auditing undergoes a progressive process, from the simple to complex, from the basic to advanced.