A Mechanism to Check Corporate Frauds - Free Essay Example

Sample details Pages: 7 Words: 2107 Downloads: 8 Date added: 2017/06/26 Category Law Essay Type Research paper Did you like this example? FORENSIC AUDIT: A MECHANISM TO CHECK CORPORATE FRAUDS ABSTRACT Satyam, Enron, Worldcom, Tyco are few of the big brands which were charged with financial frauds. Corporate are separate legal entities wherein directors and managers are supposed to act for the welfare of shareholders. Various regulators, rating agencies, auditors are part of external check system. Don’t waste time! Our writers will create an original "A Mechanism to Check Corporate Frauds" essay for you Create order However the financial frauds around the globe has raised several questions. The current paper focuses on the concept of forensic audit. It is now believed that the regular audit system was not successful in detecting the symptoms of fraud at correct time. Was it the negligence, incapability or willingness on part of auditors that these frauds occurred and led to collapse of big companies. This has led to emergence of a new concept- Forensic auditing. The current paper discusses about the concept of forensic auditing, its techniques and investigation procedure. Several institutes are now providing certified courses and producinf forensic auditors who will be experts in detecting the financial frauds. The rising numbers of forensic audits in India, specially banks, have created demand for forensic auditors. The accounting firms are now training their employees to meet the growing demad. The paper discusses the rising importance of forensic audit in context of India. It is recommended t hat there should be independent agenies conducting forensic audits to ensure that cases like Satyam do not occur again. KEYWORDS: Auditors, Forensic audit, Frauds. JEL Classification: M41, M42 INTRODUCTION Corporates scams around the world since 1990à ¢Ã¢â€š ¬Ã¢â€ž ¢s have highlighted various corporate governance issues. They have resulted in development of numbers of codes, standards and laws to improve the governance of companies. However, when one analyses the scams like Satyam, Enron, Worldcom, Tyco, BCCI etc., we find that failure of auditors was one of the important cause of the failure. The auditing companies came under the scanner during the corporate frauds. PWC, Arthur Anderson, KPMG, have been penalised in different cases. It is known to everyone how Arthur Anderson compromised with its auditing standards in case of Enron. The result was that Arthur Anderson, who was once among the à ¢Ã¢â€š ¬Ã‹Å"Big Fiveà ¢Ã¢â€š ¬Ã¢â€ž ¢ is no more a part of it and the world is left with à ¢Ã¢â€š ¬Ã‹Å"Big Fourà ¢Ã¢â€š ¬Ã¢â€ž ¢. Similarly in the case of Satyam, its auditors PWC failed to detect the fake cash and bank balances. PWC was fined $6 million by the SEC for not following the c ode of conduct and auditing standards while performing its audit duties in the case of Satyam. The history shows that auditors have not performed their duties efficiently in case of the large scandals around the world. They failed to detect frauds in the big corporates, many of which later collapsed. Ironically the companies which failed were big corporate houses and the auditors involved were also global names. When the big names can have such frauds, it would be easier for smaller companies to do fraud and get away with it. Due to rising importance of corporate governance and increasing awareness among stakeholders, it is becoming tougher for companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s management and auditors as they are under constant scrutiny of the stakeholders and regulators. Many changes have been made over the years to improve the governance of companies, like increased disclosures; fixing accountability and responsibity of Board of Directors (BOD), management and auditors; changes in composition of BOD etc. One of the latest emerging area in fraud detection and prevention is forensic audit. Let us understand what is forensic audit all about and why is its on demand, specially in banking sector. OBJECTIVES The paper aims to explore the rising concept of forensic auditing. Objectives are as follows: To understand the concept of forensic auditing. To understand how forensic audit is conducted. To analyse growing importance of forensic audit. FORENSIC AUDIT: THE CONCEPT The term forensic means à ¢Ã¢â€š ¬Ã‹Å"suitable for use in a court of lawà ¢Ã¢â€š ¬Ã¢â€ž ¢. Forensic audit refers to the examination and evaluation of the financial information of company which can be used as an evidence in the court of law. The purpose of forensic audit can be different, it may be for prosecuting a party charged of fraud, or embezzlement or for any other financial claims. We all are aware of the financial audit which involves verification of the financial statements of a legal entity, with a view to express an audit opinion. It is supposed to be an unbiased examination and evaluation of the financial statements of an organization. But the past financial scams have proved that internal and external auditors have failed to be unbiased. Forensic audit is done by an expert group. These experts are supposed to have knowledge of not only accounting standards and finance, but also skills to detect frauds. The experts are trained to investigate frauds unlike the co nventional auditors at the likes of PwC who ignored the seven-year long Satyam scam. Forensic Audit is useful due to following reasons:- The evidences collected serves as readymade proof from a third party in relation to any audit, It gives expert comment on any fraud, Forensic Audit reports can be directly placed in the court of law for prosecuting. The forensic experts need to go beyond investigation of the financial statements and explores number of questions such as:- Figure 1: Forensic Audit: Going beyond traditions questions Types of Forensic Audit: Forensic audit can be classified into two broad categories- reactive and proactive forensic audit. They are summed up in the figure below: Figure 2: Types of Forensic Audit Forensic audit should focus on significant transactions both as reflected in financial statements and off balance sheet items. In the corporate scams some of the companies had material off-balance sheet items, which if would have highlighted at right time, would have prevented the frauds. The techniques used for forensic audit are: a. Critical Point Auditing: It aims at filtering out the symptoms of fraud from the normal transactions in which they might be mixed or concealed. In order to do it, the financial statements, records etc are analyzed in order to find out unusual trends, accounts, discrepancies, inflated sales etc. b. Propriety Audit:- It is conducted by the supreme audit institutions. It uses the à ¢Ã¢â€š ¬Ã…“value for money audità ¢Ã¢â€š ¬Ã‚  technique which aims at lending assurance that economy, efficiency and efficacy have been achieved in the transaction for which expenditure has been incurred or for which revenue collected. THE INVESTIGATION PROCESS The process of conducting a forensic investigation is similar to the process of conducting a financial audit with some additional considerations. The various stages are summarized in figure 3. Figure 3: Procedure of Forensic Auditing RISING POPULARITY If we go back two years, India had only about 30 forensic auditing experts. Today the number stands at 300 that means it has multiplied 100 times! KPMGs forensic audit team conducted 220 inquiries in India in the nine months through December 2013 compared with 77 in the full fiscal year 2010-11. The rising demand is due to several reasons. The investors and stakeholders are pressurising companies to have mechanisms to identify and mitigate risk of fraud. Finaincial scams of the past has also increased the pressure on Board to seek third party investigation as a precautionary measure. After the NSEL crisis, promoters are ordering forensic audits of their firms to ensure there is no such employee fraud. Independent directors who are now considered as watchdogs, also prefer forensic audits. Also to comply with the Foreign Corrupt Practices Act, foreign companies might go for forensic audit of the books of their Indian arms or firms they intend to invest in. Countries such as the UK and US have tightened their anti-bribery and corruption laws in the past few years. Many other countries are also enacting similar laws that companies must follow to do business. NSEL scam has brought forensic audit into public discussion. The Forward Markets Commission had ordered forensic audits of NSEL and one special audit of Multi Commodity Exchange. The forensic audits are also catching up in banks. Banks are opting for forensic audits themselves as well as RBI is also ordering the same in order to investigate money laundering, fraud etc. For example, KPMG has been hored by Axis Bank to conduct forensic audit. This was due to a sting operation done by Cobrapost that alleged executives of the bank had indulged in money laundering. KPMG has also been appointed to conduct forensic audit of Universal Commodity Exchange(UCX) after it found that its promoter allegedly siphoned off funds from the exchange. UCX is the countrys sixth national level commodity bourse. RBI has i nstructed banks to include forensic auditing practices. A clean and transparent banking system is the key to detect and fight accounting frauds and other white-collar crimes like that of money laundering. RBIà ¢Ã¢â€š ¬Ã¢â€ž ¢s circular dated 16 September 2009, titled à ¢Ã¢â€š ¬Ã…“Fraud Risk Management System in banks à ¢Ã¢â€š ¬Ã¢â‚¬Å" Role of Chairmen / Chief Executive Officersà ¢Ã¢â€š ¬Ã‚ , have urged the banks to identify and train staff in forensic auditing to investigate à ¢Ã¢â€š ¬Ã…“large value fraudsà ¢Ã¢â€š ¬Ã‚  or scams involving more than 1 crore rupees. In 2013 October, RBI has mandated forensic audit of all loans of Rs 1,000 crore or more where the bank plans to move them for corporate debt restructuring. For smaller loans too, banks are advised to take the help of these auditors. The Ministry of Corporate Affairs has also established the Serious Fraud Investigation Office (SFIO), which seeks the help of forensic auditors. CONCLUSIONS Forensic audit appears to be the need of the hour to detect and prevent white collar financial frauds in corporates. The forensic audit market is at nascent stage in India. Changes have started at national level. The introduction of the Companies Act, 2013 has a significant impact on fighting and preventing frauds.Setting up of NFRA, definition of à ¢Ã¢â€š ¬Ã‹Å" fraudà ¢Ã¢â€š ¬Ã¢â€ž ¢, enhanced responsibility of auditors and directors aim to keep a check on the frauds. National Financial Reporting Authority (NFRA) have been set up by Central Government which will have wide powers to recommended, enforce and monitor the compliance of accounting and auditing standards. The auditors role has come under scrutiny as they will be regulated by the NFRA and heavy penalties have been prescribed for auditorsin case of failure. As per section 245 (1g) the depositors and members of a company can claim damages from auditors, management and other consultants for the wrongdoings by the company and its management. Many consultants and senior executives are expected to become part of the certified community. Due to increased demand, there is new career area for the young auditors. As already mentioned, a forensic investigation requires highly skilled team members who have experience not only in accounting and auditing techniques, but also of the relevant legal framework. It is believed that personnel having such skills would be in great demand and would be valuable assets to a bank for their fraud risk management activities. ICAI and ACCA are providing courses on forensic auditing that will prepare individuals to act as watchdogs in companies. Youngsters can look upto this avenue and pursue to become forensic auditor who are going to be in great demand in near future. They will be skilled and have distinct identity from regular auditors as they will be trained in muti-disciplines and relevant regulations so that they can detect and prevent frauds. However on must pay att ention to the fact that the big auditing firms who were involved in frauds themselves, will be able to detect frauds with help of forensic techniques or will it be better to have separate forensic auditing institutes who would be independent agencies and conduct independent investigations which would be complementary to the regular auditing function of the company. REFERENCES Adukia RS.FORENSIC ACCOUNTING.Last Retrieved on October 1, 2014 from www.caaa.in/Image/Forensic%20Accounting.pdf Bhattacharjee S. Despite RBI norm, forensic audits of only 12 banksfiled. Last Retrieved October 15, 2014 from https://indianexpress.com/article/business/business-others/despite-rbi-norm-forensic-audits-of-only-12-banks-filed/ Chatterji A.N. Forensic Auditing. Last Retrieved October 15, 2014 from https://www.asosaiorg/journal2001/forensic_auditing.htm Gopakumar G. Rising NPAs: RBI initiates forensic audit at United Bank. Last Retrieved October 8, 2014 from https://www.moneycontrol.com/news/cnbc-tv18-comments/rising-npas-rbi-initiates-forensic-audit-at-united-bank-_998640.html Gopalakrishna G. Forensic Auditing in Banks- Perspectives Challenges. Last Retrieved September 15, 2014 from https://cab.org.in/CAB%20Calling%20Content/FORENSIC%20AUDIT%20IN%20BANKS/Forensic%20Auditing%20in%20Banks%20-%20Perspective%20and%20Challenges.pdf Gupta T. Forensic Audit. Last Retrieved October 15, 2014 from https://www.forum.charteredclub.com/threads/forensicaudit.50/ Jaitley orders forensic audit of UCO Bank. Hindustan Times. Last Retrieved September 10, 2014 from https://www.hindustantimes.com/business-news/jaitley-orders-forensic-audit-of-ucobank/article1-1257237.aspx KPMG to Conduct Forensic Audit of UCX: Regulator. Last Retrieved 15, 2014 from https://profit.ndtv.com/news/corporates/article-kpmg-to-conduct-forensic-audit-of-ucx-regulator-665592 Malusare LB. The Effectiveness of Forensic Accounting in Detecting, Investigating, and Preventing Frauds in India. Last Retrieved October 15, 2014 from www.oiirj.org/oiirj/may-june2013/26.pdf

Aviation Transportation Security Act - 2424 Words

Aviation Aviation and Transportation Security Act Abstract The passage of the Aviation and Transportation Security Act (ATSA) in 2001 changed the way the aviation industry operated and how passengers travel. The ATSA forced the US Government and aviation to change its security culture to ensure protection of passengers and employees from future attacks like those that occurred on September 11, 2001. The ATSA was passed and signed into law in direct response to the security vulnerabilities that surfaced during the 9/11 attacks. This paper will demonstrate how the ATSA affected how US Government agencies and aviation industry upgraded security processes in an effort to prevent terrorists from attacking the US in the future.†¦show more content†¦The transfer of airport security from the privatized system to the government-controlled system has so far prevented a repeat of September 2011, but this new system has caused negative press and public uproars about personal privacy issues (GAO, 2008). In November 2001, President Bush signed the ATSA into law creating the TSA as the new federal government agency in charge of airport security (CRS, 2001). With the TSA as lead, aviation security enhancement was standardized. Today, only one agency is responsible for all screening procedures along with comprehensive passenger and employee background checks. TSA control has provided standardized security regulations, procedures, processes, requirements, and training at all airports (GAO, 2008). 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Equal Employment Opportunity Commission †Church and State Violation Free Essays

Equal Employment Opportunity Commission. Church and state violation If the criteria of Matthew and Thomas’ â€Å"Christian-only† hiring policy was spread across to all religions, then they could probably get away with it as long as the employment contracts with employees state such. If this were for a school and they had more than 15 employees, then they would have to have posters posted under Title VII of the Civil Rights Act of 1964 informing employees of their rights with the utilization of the language approved by the EEOC. We will write a custom essay sample on Equal Employment Opportunity Commission – Church and State Violation or any similar topic only for you Order Now Under the Great Commission Perspective this policy would be advisable. Being raised Baptist, currently non-denominational,some of my old Baptist fundamentalist views came into play. Being raised Baptist, I was taught that it is our rights as Christians to setup outreach ministries, missionaries, and bring as many souls to the kingdom as possible by ministering to people we meet on a day to day basis, even if this means going door to door. This goes hand in hand with several passages from the Bible. In re-reading Genesis 12: 1-3, the Great Commission Perspective, Gen. 8: 14-15 and Matthew 28: 18-20, we see the promise of God for our lives as well as the duties expected of us as Christians. â€Å"And Jesus came and spake unto them, saying, All power is given unto me in heaven and in earth. Go ye therefore, and teach all nations, baptizing them in the name of the Father, and of the Son, and of the Holy Ghost: Teaching them to observe all things whatsoever I have commanded you: and, lo, I am with you always, even unto the end of the world. Amen. † (Matthew 28: 18-20, KJV). In verse 19, Jesus charges us to teach all nations and baptize them in the name of the trinity. Verse 20 is our assurance, His promise that he is with us always, until the end of the world as we know it. â€Å"And thy seed shall be as the dust of the earth, and thou shalt spread abroad to the west, and to the east, and to the north, and to the south: and in thee and in thy seed shall all the families of the earth be blessed. â€Å"And, behold, I am with thee, and will keep thee in all places whither thou goest, and will bring thee again into this land; for I will not leave thee, until I have done that which I have spoken to thee of. (Genesis 28:14-15, KJV). In verse 14 we shall travel all ends of the earth saving souls for Christ and as a result of our faithfulness to God’s word, our children and generations to come will be blessed. Verse 15 is God’s promise that he is with us until the end and will keep us, protect us, and will not forsake us. Other scripture that comes to mind that gives the same instruction based on the Great Commission Perspective is,  "And he said unto them, Go ye into all the world, and preach the gospel to every creature. † (Mark 16:15, KJV). We can also look at the book of Luke for the same instructions, â€Å"And that repentance and remission of sins should be preached in his name among all nations, beginning at Jerusalem. † (Luke 24:47, KJV). Like Paul, some of us are meant to be apostles, setting up churches for the greater good of the kingdom and overseeing them to ensure that kingdom work is being carried out. Even though Thomas and Matthew have a good idea in regards to their hiring policy of Christians only, in my opinion it would only be foreseeable in a perfect world and in my own utopia. With so many laws that protect others religious beliefs, it makes it hard to turn a profit with such a policy in place, especially if they are looking for federal assistance in regards to utilizing tax payer dollars. My answers would change drastically if Thomas and Matthew were opening a Christian school rather than a manufacturing company. The conditions and laws change in matthew and thomas’ favor greatly. Being a school means that they have the freedom to carry out these hiring policies. Under the Civil Rights Act of 1964, Title VII allows churches and religious organizations to discriminate on the basis of religion (Bagley Savage p. 68). Under the RFRA, Religious Freedom Restoration Act 1993, federal grant programs can exempt Christian relief organizations from prohibitions against hiring only those of its own faith, (p. 136). During the Bush Administration, more funds were appropriated for expansion of religious hiring rights, including issuance of an executive order th at set the policy for federal administration agencies, (Esbeck, Carlson-Thies, Sider). Christian schools need a Christian only hiring policy in my opinion because it protects the morals, values and ethics of the Bible and how each professor uses it in accordance with everyday learning. You have people who study the word and know the word, but don’t live by the word, including some Christians, but when it comes to instructing others on how to live according to the Bible (Basic Instructions Before Leaving Earth), then a hiring policy that discriminates against religious preference makes sense. These principles are maintained by the federal government when it comes to hiring for Head Start programs and for the Workforce Investment Act References Carl H. Esbeck Stanley W. Carlson-Thies Ronald J. Sider http://www. religionandsocialpolicy. org/docs/religiousstaffing. pdf How to cite Equal Employment Opportunity Commission – Church and State Violation, Papers