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3 pages/β‰ˆ825 words
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2 Sources
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
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English (U.S.)
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Auditors and Regulatory Oversight Research Assignment

Essay Instructions:

Auditors and Regulatory Oversight
The Securities and Exchange Commission (SEC) regulates public companies. The SEC has found that some of these companies have violated GAAP by using creative accounting practices to mislead investors and creditors regarding the health of their company.
Use the Internet or Strayer Library to research a recent accounting scandal within the last five (5) years where the SEC accused public companies of accounting irregularities.
Write a three to four (3-4) page paper in which you:
Analyze the audit report that the CPA firm issued. Ascertain the legal liability to third parties who relied on financial statements under both common and federal securities laws. Justify your response.
Speculate on which statement of generally acceptable auditing standards (GAAS) that the company violated in performing the audit.
Compare the responsibility of both management and the auditor for financial reporting, and give your opinion as to which party should have the greater burden. Defend your position.  
Analyze the sanctions available under SOX, and recommend the key action(s) that the PCAOB should take in order to hold management or the audit firm accountable for the accounting irregularities. Provide a rationale for your response.
Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student's name, the professor's name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Analyze the required generally accepted auditing standards, professional ethics, and legal liability of the auditor.
Assess how the Sarbanes-Oxley Act has affected auditing.
Evaluate an audit report.
Evaluate objectives for conducting audits, and compare management's and auditors' responsibilities.
Use technology and information resources to research issues in auditing.
Write clearly and concisely about auditing using proper writing mechanics.

Essay Sample Content Preview:

Auditors and Regulatory Oversight
Student’s Name
Institutional Affiliation
Auditors and Regulatory Oversight
The integrity of public companies depends on the quality of audit reports provided by CPA firms. The presented report can create a strong or destroy the image of the company to the public. However, it is not only public companies that are at risk, the auditing firms are also in the eyes of the watchdogs based on the quality of audit reports they provide. With the desire to maintain a healthy public image, companies have devised mechanisms of conspiring with the accounting practices to achieve their objectives. Some of these mechanisms are hidden from the independent investigators when they are doing the audits. There has been some accounting scandals in the past few decades, affecting big public companies such as Toshiba. Throughout the years few scandals have been associated with auditing firms. Currently, KPMG is under probe over its audits of Rolls-Royce's statements for the periods 2010 to 2013 a time the company has admitted that it committed a variety of accounting irregularities such as corruption and bribery. This probe has affected the reputation of not only one of the "Big Four" firms but all of them.
The legal liability of third parties allows them to sue the auditing firm for not discovering any material misstatements in the financial statements of the company. Besides the fact that the financial statements under investigations had misstatements, it has been argued that they were equivalent to 0.029 percent of the group's revenue by the US Department of Justice. This implies that they were immaterial and reduced the likelihood of them being spotted by the auditor. However, besides the immaterialness of this information, it was misleading to the third parties. KPMG was competent in its work, and they know the industry. It can also be said that it was well prepared for the task. Since Rolls-Royce was on a mission to win huge contracts in emerging markets, the bribery and corruptions issues were a conspiracy. Therefore, there would be a legal liability under the common and federal securities. The third party would sue the auditor if it incurred a loss due to the reliance on the misleading information. This will occur if the third party was unable to realize its objectives by proving that the misleading audit reports were relied on making various decisions. Therefore, based on this the auditing fi...
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