logo image Write My Paper

Management’s responsibility

We can attribute societies demand for improved corporate governance on the number of recent financial scandals that have occurred in both the United States and abroad in the past decade. For many organizations, the way to rebuild shareholder confidence was to implement a fundamental framework of procedures that would ensure scandals like Enron, WorldCom and Tyco would not occur in the future. It is precisely these scandals that made corporate governance the focus of organizations worldwide.

Corporate governance is defined as the principles and processes that provide the strategies on how an organization directs and obtains its goals, the oversight process for implementing effective accountability from its directors and managers (Rittenberg, Johnstone, & Gramling, 2012). What are two of the principles that surround corporate governance? How do they tie into the recent legislation that was put into place to resolve ethical challenges and changes within the last decade? Two principles that surround corporate governance include “successful management and ethical corporate culture and independence and objectivity” (Creel, 2013).

It is management’s responsibility to create a culture of “integrity and ethical behavior” (Rittenberg, Johnstone, & Gramling, 2012). In addition, it is imperative for board members to maintain their objectivity and their judgment must remain

Need essay sample on "Management’s responsibility"? We will write a custom essay sample specifically for you for only $ 13.90/page

independent and in the best interest of its stakeholders. Corporate governance seemed to disappear when top management of Enron believed their accounting method of mark to market and their off balance sheet partnerships was in the best interest of the organization.

Did the auditors from Arthur Andersen believe they had something to hide when CORPORATE GOVERNANCE 2 they erased computer drives and shredded documents during Enron’s collapse? In addition to the failure of Enron, the Security and Exchange Commission charged Arthur Andersen when it was uncovered that senior auditors knew and hid fraudulent activity at Waste Management (Norris, 2002). These financial scandals are just a few in the last decade that has increased the need for the creation of regulations that govern the accounting industry and the

auditors within those firms. The non-existence of ethical judgment by the accounting firm of Arthur Andersen and its auditors assisted in the implementation of the Sarbanes-Oxley Act in 2002. It was imperative to reestablish the public’s confidence in investing as well as provide investors with the assurance that financial statements would represent an accurate picture of an organization’s current financial picture. The Generally Accepted Auditing Standards (GAAS) are based upon 10 audit guidelines that fall into 3 categories.

Briefly describe the 3 main parts of the audit, and give examples of what activities would occur in each category. Although there are ten audit guidelines the Generally Accepted Auditing Standards are based on, all fall into three categories. Those three main categories issued by the AICPA would include the general standards, the fieldwork standards and finally the reporting standards. The general standards require auditors to possess adequate technical training and expertise.

In addition, independence in all matters related to the audit and conducting the audit with “due professional care” are expected at this stage. The fieldwork standards require proper planning and supervision of the audit, the auditors to understand the entities internal control system, and obtain appropriate and reasonable assurance that proper auditing procedures were followed to provide an unbiased opinion (Rittenberg, Johnstone, & Gramling, 2012). Finally, it is the reporting standards stage of the auditing process that I believe is the most important.

It is during CORPORATE GOVERNANCE this period where the auditor states if the financial statements are presented fairly in accordance with the applicable principles of GAAP. Furthermore, this phase contains the auditor’s opinion on the presentation of the financial statements or that he cannot express an opinion (Rittenberg, Johnstone, & Gramling, 2012). Describe the role of the audit committee. Include the outside directors in your discussion. Compare and contrast the oversight responsibility and the primary responsibility of the audit committee.

The audit committee’s three main priorities include overseeing the “accounting and 3 financial reporting processes and of the financial statement audits”, selection of external auditors and establishment of a whistleblowers program (Rittenberg, Johnstone, & Gramling, 2012). Publicly held organizations are required to have outside directors on the committee and at least one member must be a financial expert familiar with Generally Accepted Accounting Principles (GAAP). Additionally, the audit committee works independently of management.

As a subcommittee of the Board of Directors, the audit committee is also responsible for reviewing the internal audit procedures, sets the budget for the internal audit, provides special investigations and maintains open communication between management, external and internal auditors as well as the board of directors. The audit committee is responsible for monitoring the objectivity and proficiency of all auditing functions (Rittenberg, Johnstone, & Gramling, 2012). Explain how the Sarbanes-Oxley Act impacted the auditing profession.

Enacted in July 2002, the Sarbanes-Oxley Act is the government’s attempt to improve the quality of corporate governance and reestablish investor confidence. Sarbanes Oxley addresses the concerns of preventing another Enron fiasco. Provisions of the Act make top management accountable for their company’s financial reports. The Act established the Public Company CORPORATE GOVERNANCE Accounting Oversight Board (PCAOB) bequeathing them the “power to set auditing standards for audits of public companies” (Rittenberg, Johnstone, & Gramling, 2012).

Reporting on internal controls as well as forfeiture of compensation for management who have a restatement of financials are two additional provisions of the Act. However, I believe the most important, 4 limiting “the non audit services” that can be offered to an audit firms audit clients is one that will assist in limiting the opportunity to fraud by increasing the number of individuals involved in oversight of an organizations financials (Rittenberg, Johnstone, & Gramling, 2012). Describe the key role of the PCAOB.

The key role of the Public Company Auditing Oversight Board (PCAOB) is to set the standards for the audit process of publicly held organizations. They require registration of firms providing auditing services to public companies and those firms to become licensed. They have set standards on materiality, audit evidence, internal controls and documentation. It is also the responsibility of the PCAOB to investigate and discipline “registered public accounting firms” accused of standards violations (Rittenberg, Johnstone, & Gramling, 2012). Do you feel that it has met its objective?

What—if any—changes would you want to add to the scope of the PCAOB? Setting standards for the audit process has been the PCAOB’s main priority; however, meeting this challenge has become difficult. For every standard that is established, there is the individual who is working to discover the loophole, which will permit fraud, deception and dishonesty to survive. Until we become a society where ethics is our primary focus, we will continue as humans to fall into the traps that feed our humanly flesh; where greed for money and success is foremost in our minds.

Suggestions for changes would include stricter accountability CORPORATE GOVERNANCE through additional training with an emphasis on ethical behavior. We can make change work only if we change the attitude of those involved. 5 References Creel, T. (2013). Corporate governance: Live chat presentation 2: [Auditing]. Colorado Springs CO: CTU Online. Retrieved January 15, 2013 from CTU Online, Virtual Campus, ACCT325-1301A-01: https://campus. ctuonline. edu/pages/MainFrame. aspx

ContentFrame=/Classroom/Pages/d efault. aspx Norris, F. (2002, January 11). Did Enron’s auditors think they had something to hide? Retrieved January 14, 2012, from The New York Times Business Day: http://www. nytimes. com/2002/01/11/business/did-enron-s-auditors-think-they-hadsomething-to-hide. html Rittenberg, L. E. , Johnstone, K. M. , Gramling, A. A. (2012). Auditing: A business risk approach. Retrieved January 6, 2013, from Colorado Technical University Online, Virtual Campus ACCT325-1301A-01: http://wow. coursesmart. com/9781285493664/firstsection

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy close