When Beam began understating the company’s expenses, he argues that the investors will only be misled by a “little.” Based on this statement, Beam is distorting the harm that he is inflicting. He felt that investors are smart enough to understand this and would not be harmed by it. He was convinced that his dishonesty
Shareholders: When operating ethically shareholders would like to maximise their return on investment. They would likewise need to guarantee that supervisors are behaving ethically and not risking investors’ capital by engaging in actions that could hurt the company’s reputation. Shareholder’s may not be happier as the return on investments would be lower when a business attends to operate ethically but it is possible to persuade them by clarifying the long haul results of the business. Customers: They are the most critical stakeholder for a business. Customers would need new better quality items at sensible prices.
They not only lead to decrease of the organizations stock value but also to the decrease in profit since investors would no longer interested in investing their money into a corrupted company; as well as in creating damage to its reputation. Further, they have learned lessons on the importance of hiring upstanding employees (which is an external auditor); who will contribute to the improvement of the company instead of lead it to its demise. It also goes to show how imperative it is to maintain good accounting practices and establish efficient accounting systems in the organization (infit Accounting; 2014). The reason that make users trust auditors opinion is that external audit are trusted to express an opinion on the fair presentation by using the terms of an acceptable financial reporting framework (Like IFRS or SME’s). (Louse Kretzschamar & Fransprinsloo, 2012:
The unrealistic expectations of external users of financial statements to assume that an auditor remains totally impartial to client influence is a conclusion drawn from psychological research. The legal system forms the opposite view and has determined that external users should be able to rely implicitly on an auditor’s determination. Accounting standards have set expectations of auditor independence and neutrality. (Max H. Bazerman, 1997) The entire concept of professional scepticism and its application is the true and fair representation of financial statements to the users of these
Throughout the case, it can be seen how Cendant Corporation was performing activities that dealt with the interactions of income smoothing. The main cause of performing with Income Smoothing was to make their shareholders and investors believe that they had a professional and ethical operation running. Income smoothing can best be represented as how either gains or losses from a certain period are taken into a good or bad period with losses or no profits. Income smoothing throughout this case was used as an unethical practice performed by Cendant Corporation to achieve financial stability and falsify numbers to make the investors believe they had premium stocks when in reality it wasn’t what was really occurring which would then lead to the
The first step that the auditor should take is to gather as much information about any security procedures and policies that may have been in use following the information collected from the records available. Since each policy may have a different aspect that it works on, the findings from the audit may present evidence that may be vital in identifying the existing procedures or the absence of any policies or procedures. The existence of policies and procedures enables a company to reduce the occurrence or the impacts of a given risk. The lack of such policies may lead to reduced risk management
ENRON/ ANDERSEN SCANDAL To preserve the integrity of his reports, the accountants must insist upon absolute independence of judgment and action. The necessity of preserving this position of independence indicates certain standards of conduct. If the confidence of the public in the integrity of accountants’ reports is shaken, their value is gone (Arthur Andersen in a 1932 Lecture on Business Ethics). The purpose of accounting is fairly simple, that is to measure that the portrait the company’s accountants’ paint in the financial statements is as accurate as possible (Ronald Duska, Brenda Shay Duska and Julie Ragatz 2011). In the financial statement audit, the auditors are assigned to assure that the financial statements provided by the management
Code of Conduct of General and Administrative Division The code of conduct of General and Administrative division is to perform honest and ethical conduct that compliance by the law and the standard of company database and record in order to provide detail financial statements. General and Admininstrative division in Mad Cafe shall never manipulate, fraud the firm independent transaction record. Financial division is expected to perform honesty and integrity. Financial division should be fair, transparent, and accurate in transaction report and documents of the company. Transaction record of company shall be protected.
The wealthy will try and manipulate laws so that they won’t be taxed as much. Viewing this argument through Olsson’s article, give the reader a hint on how Wal-Mart deals with them being taxed. They find way to manipulate their employees in working extra time without paying them for those extra hours. This way if they don’t pay their employees those extra hours they won’t be taxed for it and even gain a profit as well. In the end the lower class will loss and not have a fighting chance against powerful retail company like
The first type is “neutral” view. In this the auditor neither assumes that management is dishonest nor assumes unquestioned honesty, under (AU 230.09) Second view is "presumptive doubt” view because of the quality of fraud, the auditor’s exercise of professional skepticism is important when considering the risk of material misstatement due to fraud. In this the auditor should conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past experience with the entity and regardless of the auditor’s belief about management’s honesty and integrity. Furthermore, professional skepticism requires an ongoing questioning of whether the information and evidence obtained suggests that a material misstatement due to fraud has occurred (AU 316.13) In addition to, most academic literature adopts this view of presumptive doubt, for example, Shaub (1996) equates skepticism with suspicion and as the opposite of trust. Hogarth and Einhorn (1992) defines a skeptic as being someone who is highly sensitive to negative evidence but ignores positive evidence, and McMillan and White (1993) view an auditor as skeptical if the auditor is more sensitive to evidence that reduces the risk of failing to detect errors in the client’s financial