Opportunity to apply introductory auditing
Mar 13,23Question:
Background:
ASSESSMENT GUIDE
ACCT601 Auditing Semester 2, 2020
Assessment Number 1 Assessment Artifact: Written Report
Weighting: 30%
- Opportunity to apply introductory auditing knowledge learnt into practice
- Exposure to real-life scenario
- The feedback from this assessment will help students to be ready to correct any conceptual misunderstanding and apply in subsequent assessments
What are the types of employability skills that I will acquire upon completion of this assessment?
Why this assessment?
| Skill Type | |
| Developed critical and analytical thinking | x |
| Developed ability to solve complex problems | ☐ |
| Developed ability to work effectively with others | ☐ |
| Developed confidence to learn independently | ☐ |
| Developed written communication skills | x |
| Developed spoken communication skills | ☐ |
| Developed knowledge in the field study | ☐ |
| Developed work-related knowledge and skills | x |
Assessment Overview:
The purpose of the Assessment Task 1 is to develop a student’s understanding of the professional and ethical aspects of auditing as well as how auditing can contribute to socially responsible outcomes and can foster common good and stewardship. The first assessment also aims to develop students’ understanding of accounting /auditing standards and the legal framework.
| Due date: | Week 6, Aug 31, 12 noon |
| Weighting: | 30% |
| Length and/or format: | 1,200 words |
| Learning outcomes assessed | LO 1 |
| Graduate attributes assessed | GAs 2 and 5 |
| How to submit: | Turnitin |
| Return of assignment: | Posted by Sep 14 |
| Assessment criteria: | Rubric: see end of document |
Context
Corporate fraud cases in UK, US, China and South Africa
Instructions
Where appropriate and warranted, internet research for (i) more facts of the cases; and (ii) facts and statistics of auditing profession in a country of your choice, other than UK,.
Study well the Weeks 1 to 3 learning materials available on LEO.
Answer the questions in the Assessment document, which are very specific.
Structure
- Introduction
- Discussion
- Common good and stewardship
- Australia’s Corporations Act 2001
- ASAs
- General analysis
- Recommendations
- References
How do I submit?
Assessment 1 Dropbox on LEO.
Checklist for students to submit along with their assignment
| My submitted assignment report is within the specified word limit | ☐ |
| I have included references using specified referencing style | ☐ |
| I have correctly cited all my sources and references | ☐ |
| I have formatted my report as per the specifications | ☐ |
| I have checked my Turnitin report to ensure the similarity report is acceptable and explainable | ☐ |
| I will be able to supply the process output, if required by my lecturer to prove this my own work (e.g screen dump of my search and retrieval of journal articles, etc.) | ☐ |
| I have completed proof reading and checked for spelling and grammar | ☐ |
| I have submitted my work before the due date/time | ☐ |
Some Helpful Websites and Resources
Please refer to (i) the Weeks 1 to 3 learning materials available on LEO (including links to Australia’s Corporations Act 2001 and ASAs); and (ii) the specific tutorial recording on the assessment.
In another word, all resources necessary for the assessment are available on LEO, other than (i) more facts of the cases; and (ii) facts and statistics of auditing profession in a country of your choice, other than UK, where appropriate and warranted
Who can help me?
- Academic skills Unit (ASU)
Please visit the Student Portal or the ACU’s LEO site, including the 24/7 on-demand study support service
- National-Lecturer-in Charge
| Campus:
Name: |
Brisbane, Melbourne, North Sydney, Strathfield
Philip Cheng |
| Office location: | 532.6.17 |
| Email: | Philip.cheng@acu.edu.au |
| Telephone: | 02 9739 2914 |
| Contact: | Preferred means of contact: Email. Response Time: Within 2 business days normally if not the same day |
- Student Services Centre, AskACU, in each campus might also be helpful in directions for
I’m having problems
Forms for extension of time for assessments, special consideration and others are available at the link: https://www.acu.edu.au/study-at-acu/how-to-apply/forms
Referencing
All referencing should be in ACU Harvard style; however if you are coming from another faculty, you may choose to use your usual referencing style. If this is the case you must indicate at the top of your reference list what referencing style you are using (e.g. APA, MLA, Chicago, etc).
Please ensure your assignment makes use of in-text citations and a reference list. Missing citations or references is equivalent to plagiarism.
Criteria
The full criteria is compiled in a rubric, which can be found on the following page/s.
Optional Student Feedback Request Proforma
All students will receive feedback on their assessment based on the rubric. If you would like to get specific feedback on this assignment, fill in the following table and submit it along with your assignment. Please put in comments about particular feedback you are seeking as well as providing feedback on the assessment to help us in the process of continuous improvement.
| Questions | Student’s Response |
| What are the main strengths of this work? | |
| What areas need improvement in this work? | |
| What do I need to focus on to improve my grade in the next assessment? | |
| Provide constructive feedback on this assessment for improvement. |
Rubric for Assessment Task 1 (30 marks)
| Relevant LO/GAs | Criterion (related to a single GA from the related LO – one GA per criterion | Does not meet expectations | Meets expectations | Exceeds expectations | ||
| NN | PA | CR | DI | HD | ||
| GA2 LO1
Weight = 10 marks TL = 5 Learning Stage: D |
Implications of external audits to common goog and stewardship of communities at large
10 marks |
Undeveloped understanding of the implications of external audits to common good and stewardship of communities at large | Basic understanding of the implications of external audits to common good and stewardship of communities at large | Developing understanding of the implications of external audits to common good and stewardship of communities at large | Discerning understanding of the implications of external audits to common good and stewardship of communities at large | Advanced understanding of the implications of external audits to common good and stewardship of communities at large |
| GA5 LO1
Weight = 20 marks TL = 4 Learning Stage: D |
Purpose, nature and benefits of external audits to shareholders and business communities at large
20 marks |
Undeveloped understanding of the purpose, nature and benefits of external audits to shareholders and business communities at large | Basic understanding of the purpose, nature and benefits of external audits to shareholders and business communities at large | Developing understanding of the purpose, nature and benefits of external audits to shareholders and business communities at large | Discerning understanding of the purpose, nature and benefits of external audits to shareholders and business communities at large | Advanced understanding of the purpose, nature and benefits of external audits to shareholders and business communities at large |
FACULTY OF LAW AND BUSINESS
Peter Faber Business School
National (Brisbane, Melbourne, North Sydney, Strathfield)
Semester 2, 2020
ACCT601 Auditing and Assurance Services
Assessment Task 1: Individual Assignment
Total Marks: 30 (Weightage: 30%)
Topic: Corporate Fraud vs Auditors
Cases
- Carillion, United Kingdom, 2018
Construction giant Carillion collapsed under the weight of a £1.5 billion debt.
In May 2018, a UK parliamentary committee said its collapse was due to “recklessness, hubris and greed.” Accountants KPMG, which earned £1.5 million a year from the Carillion account, accused of rubberstamping figures that “misrepresented the reality of the business” as well as incurring a conflict of interest due to its work advising the pension scheme.
- Gupta, South Africa, 2018
Gupta Group, with business in mining, air travel, energy, technology and media, collapsed in February 2018,
KPMG faced very heavy criticism over work done for the Guptas, with whom it had worked for 15 years until stepping down in 2016, and was forced to issue a public apology as well as withdrawing findings in a report used as evidence in a police probe. Ex-KPMG auditor Jacques Wessels was subsequently charged with inappropriate conduct and tax evasion.
- General Electric (GE), United States, 2018
At the beginning of 2018, it was announced that the Securities and Exchange Commission (SEC) was investigating its “aggressive accounting” practices, a probe that widened throughout the course of the year when in October 2018 its $22 billion non-cash charge related to acquisitions came under scrutiny, with the Department of Justice also launching an investigation. In June it was removed from the Dow Jones Industrial Average, the only member left of the original 1896 index. John L Flannery stepped down as Chairman and CEO. GE’s market value fell by more than $200 billion over two years.
The relationship between the auditor KPMG and GE was described as “too cozy” – emblematic of the concerns about choosing accountants with whom a company has “chemistry”.
- Luckin Coffee Inc, China, 2020
Its Nasdaq-listed shares slumped 83% since the company announced that its chief operating officer and some underlings may have fabricated billions of yuan in sales for 2019. Accounting firm Ernst & Young later said it discovered the fabrications when it audited the firm’s financial statements.
Luckin Coffee Inc.’s board is seeking the resignation of Chairman Charles Zhengyao Lu.
- Huawei, China, 2019
In May 2019, U.S. authorities charged Chinese telecom giant Huawei with nearly two dozen criminal charges and sought extradition of Huawei executive Meng Wanzhou from Canada.
The indictment alleges Huawei misled the U.S. and a global bank about its relationship with two subsidiaries, Huawei Device USA and Skycom Tech, to conduct business in Iran. In 2018, President Donald Trump reinstated all U.S. sanctions on Iran.
A second indictment alleges Huawei stole technology from phone company T-Mobile used to test smartphone durability plus obstructed justice and committed wire fraud.
Structure of Assessment
- Introduction
Explain (i) the purpose of external auditing; and (ii) the relationship between an auditor and an auditee.
- Discussion
You might need to research more facts for the cases listed above to support your answer.
Please identify each section by an appropriate heading.
- Discuss the concepts of common good and stewardship, and then analyse whether KPMG, in the above cases, has failed to promote common good and stewardship with respect to (i) companies’ shareholders; and (ii) communities at large, respectively.
Please adopt the following structure in your answer:
- Concepts of common good and stewardship
- KPMG’s promotion common good and stewardship to shareholders
- KPMG’s promotion common good and stewardship to communities at large
- Apply Australia’s Corporations Act 2001 to KPMG in the above cases.
Select two sections of the legislation from its index (e.g. Division 5: Section 324: Auditor rotation for listed companies; Division 6 Sections 325, 327, 328, 329, 331: Appointment, removal and fees of auditors for companies).
Discuss their intended purposes, and discuss whether they are effective in preventing auditors from behaving like KPMG had, viz. is the legislation effective and does it have a deterrent effect for its intended purpose?
Please adopt the following structure in your answer:
- First section: Intended purpose and deterrent effect
- Second section: Intended purpose and deterrent effect
- Apply Australia’s Auditing Standards, ASAs, to all the above cases.
Select two sections (e.g. ASA 230 Audit Documentation; ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report; ASA 500 Audit Evidence) of the Australian Auditing Standards (ASA) from its index.
Discuss the aspects of auditor’s auditing performance the sections intend to regulate, and whether they are adequate to uncover the fraud as committed in the above cases, respectively.
Please adopt the following structure in your answer:
- First ASA: Intended regulation of auditor’s performance and adequacy in uncovering the fraud in each of the above five cases
- Second ASA: Intended regulation of auditor’s performance and adequacy in uncovering the fraud in each of the above five cases
- “Beginning with the collapse of Carillion and through to the collapse of Thomas Cook, the Financial Reporting Council (FRC) UK was exposed as a toothless regulator with a “parasitical relationship” with the Big Four, facing its own dissolution…
Major issues include the fact that companies choose their own auditors, which means they go for those with a “cultural fit” or with whom they had “chemistry” rather than choosing a firm that was going to offer the toughest scrutiny. Another problem was limited choice. In UK, the Big Four firms conducting 97 per cent of the audits. There were worries that the focus of quality could be compromised by the fact that 75 per cent of the Big Four’s revenue came from other services including consulting.”
Discuss whether you would agree with the above opinion and concerns in a country of your choice, other than UK. You need to support your answer with appropriate facts and statistics, as exemplified by what is provided.
- Recommendations
Suggest a reform measure in (i) professional and ethical conduct of external auditors; (ii) legislation in regulating auditors; and (iii) auditing standards, respectively, in view of the above cases and concerns.
- References
Answer:
Introduction
FACULTY OF LAW AND BUSINESS
Peter Faber Business School
National (Brisbane, Melbourne, North Sydney, Strathfield)
Semester 2, 2020
ACCT601 Auditing and Assurance Services
Assessment Task 1: Individual Assignment
Topic: Corporate Fraud vs Auditors
Table of Contents
1) Introduction. 3
2) Discussion. 4
- a) Common good and Stewardship. 4
- b) Australia’s Corporations Act 2001. 4
- c) Australia’s Auditing Standards. 4
- d) General Analysis. 5
3) Recommendations. 5
4) References. 6
1) Introduction
The process which is used for ensuring the adequacy, effectiveness and conformity of guidelines, processes, internal controls, and policies of a company with the requirements of the government, standards of the industry and policies of the company is known as external audit. The use of this kind of audit is also made for ensuring that mechanisms of reporting are helpful in preventing errors in financial reports (Codjia, 2017).
The investors are provided “full assurance” that the accounting information presented in the financial reports is complete, fair, and such information is being adhered to the GAAPs and other requirements of the regulators through a report of external audit (Codjia, 2017).
The process of external auditing is crucial for three groups of users, namely – management of the company, investors and regulators. The report of audit is reviewed by the company’s managers at senior level and the committee of auditing for getting to know about malfunction in the operations and divisions which are subject to risk of incurrence of loss. The detection of trends of business and practices of the company is made by the regulatory authorities in the reports of audit and they also get to know whether the company follows the said practices are complied with the relevant laws. The opinions formed by the auditors are read by the investors for the measurement of standing of the company in terms of economics and initiatives taken by the management in short-term or strategies formed in the long-term (Codjia, 2017).
In the previous years of relationship between auditor and client, higher chances of frauds were found in case the auditors are being rotated frequently and in case where the auditors have not been changed for very long time then the chances of committing of fraud are very low. The auditors are inclined towards issuing an audit report showing true and fair view before the filing of bankruptcy in the previous years of relationship of auditor and client (BIRJANDI, BIRJANDI, MIHANDOOST and Sedaghat, 2013).
Various debates have been ignited regarding the advantages and disadvantages of a number of auditing procedures like rotation of auditors due to accounting frauds at Enron, WorldCom and Parmalat. Apart from trust and confidence of the stakeholders, the various differing advantages connected to rotation of auditors are that it can lead to the development of a system of peer-review which is effective and is capable of discouraging practices of accounting which are aggressive through the encouragement of critical reviews upon each auditor turnover; conflicts of interest which would arise during the long-tenure auditor-client relationship could be prevented; and a more competitive market would be promoted for the audit firms leading to the audits of higher quality (BIRJANDI, BIRJANDI, MIHANDOOST and Sedaghat, 2013).
2) Discussion
a) Common good and Stewardship
The concept of common good is taken as the sum of all individual goods, that is, as the “greatest happiness of the greatest number” rather than putting more emphasis on rights and interests of the individuals. This notion is most closely associated with the utilitarian philosopher Jeremy Bentham (1748–1832) (Jaede, n.d.).
Stewardship is inclusive of terms like safeguarding which means wise and fair use of the resources of human and finance. It is frequently expressed as a call for giving talent, time, and resources of finance to God, especially through the Church (Concept of Stewardship, 2020).
As per the information given in the cases, KPMG has failed to promote common good and stewardship with respect to shareholders by rubberstamping the figures which were manipulative and with the general public at large by approving the pension scheme which is fraudulent.
b) Australia’s Corporations Act 2001
Division 5: Section 324: Auditor rotation for listed companies states that in respect of a listed company, the significant role can be played by an individual auditor for a term which should not exceed 5 financial years successively (CCH iKnow | Australian Tax & Accounting, 2020).
Division 6 Sections 325, 327, 328, 329, 331: Appointment, removal and fees of auditors for companies state that auditors are required to be appointed with the consent of shareholders in the general meeting of a company every year and the remuneration and removal of the appointed auditors should also be decided by the company with the consent of shareholders (CCH iKnow | Australian Tax & Accounting, 2020).
The abovementioned sections are effective enough to control auditors from indulging in the frauds which are known to them while conducting audit for the reason that they have a significant relationship with the auditee company. Law provides that an external auditor should not have any kind of relationship with the auditee company.
c) Australia’s Auditing Standards
As per ASA 240, an auditor is required for the maintenance of an attitude of professional scepticism so that he can get to know there are chances of existence of fraud, irrespective of the past experience of the auditor with the company regarding the integrity and honesty of management and those charged with governance (ASA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report, 2020).
As per ASA 230, the documentations related to audit are required to be prepared by the auditor which are sufficient enough so that an auditor who is experienced and does not have any earlier connection with company can get information for understanding about the NTE of the procedures of audit; the outcomes of the procedures of audit, and the audit evidence which have been obtained; and important matters which arise in the process of audit, and important decisions related to profession that were made in getting to the said conclusions (Auditing Standard ASA 230 Audit Documentation, 2020).
In the above cases of fraud, the auditor was equally responsible as he did not issued a qualified audit report.
d) General Analysis
The independence of external auditors is of utmost importance to ensure that the financial reports which are prepared by the management of the company are consistent with and valid as per the applicable accounting frameworks. However, the accounting frauds which have taken place recently are of the view that the auditors had been lacked in terms of scepticism and judgement in the audit of those companies. The probe into the accounting scandals has revealed that external auditors were not completely independent from the management in those audit engagements (Roy and Saha, 2016). This situation of auditor’s independence has been dealt in with reference to India and the world. Hence, I agree with the opinion that has been mentioned in the given case.
3) Recommendations
The auditor should take care of the professional ethics while conducting audit as per the auditing standards. The auditing standards which are important in the above cases are ASA 200, 230, 240, 500.
4) References
Archmil.org. 2020. Concept of Stewardship. [online] Available at: https://www.archmil.org/offices/development-stewardship/Concept-of-Stewardship.htm [Accessed 27 August 2020].
Auasb.gov.au. 2020. Auditing Standard ASA 240 The Auditor’s Responsibility To Consider Fraud In An Audit Of A Financial Report. [online] Available at: https://www.auasb.gov.au/admin/file/content102/c3/ASA_240_28-04-06.pdf [Accessed 27 August 2020].
BIRJANDI, H., BIRJANDI, M., MIHANDOOST, R. and Sedaghat, M., 2013. The Relationship between the Auditor and the Client and Its Impact on Audit Quality in Iran. International Journal of Accounting, Banking and Management, [online] 1(2), pp.20-33. Available at: https://pdfs.semanticscholar.org/5dda/d9dc278469def79a0948f7df11c6786deca0.pdf [Accessed 27 August 2020].
Codjia, M., 2017. The Purpose of an External Audit. [online] Bizfluent. Available at: https://bizfluent.com/about-6614835-purpose-external-audit.html [Accessed 27 August 2020].
Iknow.cch.com.au. 2020. CCH Iknow | Australian Tax & Accounting. [online] Available at: https://iknow.cch.com.au/360document/atagUio486418sl14509355/section-324da-limited-term-for-eligibility-to-play-significant-role-in-audit-of-a-listed-company-or-listed-registered-scheme/overview [Accessed 27 August 2020].
Iknow.cch.com.au. 2020. CCH Iknow | Australian Tax & Accounting. [online] Available at: https://iknow.cch.com.au/360document/atagUio486426sl14509418/section-327a-public-company-auditor-initial-appointment-of-auditor/overview [Accessed 27 August 2020].
Jaede, M., n.d. The Concept of the Common Good. [online] Thebritishacademy.ac.uk. Available at: https://www.thebritishacademy.ac.uk/documents/1851/Jaede.pdf [Accessed 27 August 2020].
Roy, M. and Saha, S., 2016. Statutory Auditors’ Independence in India: An Empirical Analysis from the Stakeholders’ Interest Perspective. Vikalpa: The Journal for Decision Makers, [online] 41(1), pp.28-50. Available at: https://journals.sagepub.com/doi/pdf/10.1177/0256090915626791 [Accessed 27 August 2020].
0 responses on "Opportunity to apply introductory auditing"