Audit and Assurance in Australia for G Medcraft-myassignmenthelp.com

Question: Discuss about theAudit and Assurance in Australia for G Medcraft.v Answer: Introduction: Around two eras before corporate governance was comparatively unidentified topic. The matter originated during the late 80s and in the initial 90 when the corporate governance sector in most the nations was bounded by difficulties of dubious unethical practices. The failure of One Tel, Adelaide Seamanship, and Satyam exposed the auditing gaps that led to the collapse of these companies. Several failures gave rise to the reformation procedure and introduction of public accounting reformation. The objective of this report is to assess the ethical behaviour of auditors and management. The report will be analysing the collapse of Satyam and highlight the management and audit failures. Statement by G Medcraft: Mr. G. Medcraft is regarded as the former chairman of the Australian Securities and Exchange Comission and is concerned regarding the roles and responsibilities of the auditors while performing the work of audit (Hayes, Wallage and Gortemaker 2014). As evident from the statement of G. Medcraft it warns the Australian accounting authority regarding the roles and accountabilities of auditors. The statement made by G. Medcraft highlights his concern associated to auditors dependency and trust on financial information. G. Medcraft stressed on specific auditors roles and responsibilities. The primary responsibility of auditor is to carry out the audit plan and functions to get adequate evidence of financial statement whether those statements are free from any materiality misstatement (De Paula 2016). On observing any materiality misstatement, the auditors are required to comply with the ethical principles surrounding audit to derive unbiased audit opinion. In the article of G. Medcraft, a serious lack of professional conduct and professional scepticism is noted in the roles and responsibilities of auditors. The statement made by G. Medcraft expressed his opinion that Australian auditing companies are required to avoid any major unfolding of auditing scandals such as Enron that tarnishes the audit profession. As evident from the above conversation, of late there has been widespread circumstances where the professional conduct and professional scepticism of auditors have faced questions (William, Glover and Prawitt 2016). Instances noted suggest that auditors have failed discharge their responsibilities. With the unfolding of major audit fraudulent scandals, there is a lack of trust among the community relating the financial information published by them. Purpose and audit report of Satyam India: Audit forms the important element in business firms and Saytam is no exception to such reports. The audit report forms the opinion of the auditor associated to financial statements of the organization (Kumar and Sharma 2015). This requires an organization to follow a certain set of auditing standards and procedures in the preparation of audit report. In context of Satyam, the primary purpose of audit report was to provide the users of financial information with the necessary information regarding the organization financial performance. There were numerous users of financial report for Satyam that included investors, auditors, customers, lenders, creditors etc. the users made use of the financial report for making different forms of decision (Zeff 2016). The audit report issued by the auditors failed to observe any form of fraud and error and stated that the Satyam financial statements were free from any materiality misstatements. The PWC being the major auditor for Satyam since 2001 also erroneously reported that financial statement of Satyam Computers were prepared by adhering to the required auditing standards and financial reporting regulations. An opinion can be formed on the PWC audit report that, being the sole auditor it failed to carry out the auditing obligations in compliance with the necessary auditing standards. Extent of meeting auditing purposes: The opinion of the auditors entirely represented a different state of affairs for Satyam Computers that was declared in the audit reports. Evidences obtained from the findings truly provides that the auditors of Satyam Computers namely PWC, contributed immensely to present the fraudulent financial statement of the organization (Vasarhelyi, Alles and Kogan 2018). The fraudulent act landed PWC with a fine of $6 million handed by United States Securities and Exchange Commission. Besides this, the US Securities and Exchange Commission along with Securities and Exchange Board of India (SEBI) banned PWC from conducting any audit work since it failed to adhere with the necessary auditing standards and procedure. The auditors of the Satyam computers did not met the auditing principles while performing the audit procedure and ultimately contributed to the decline of the company. The auditors simply overlooked the materiality misstatement in the financial statements that failed to reflect a true and fair view of the financial situation of the business (Wilson 2017). With falsified books of accounts and the existence of insider trading evidently contributed to the decline of Satyam Computers. Evaluation of Satyam Company Management and Auditors ethical behaviour Background: During the year 1987 on 24th June Satyam Computer Service Ltd was incorporated as the private limited company with 20 staffs. The company provided software development and consultancy services to large number of corporations (Samsonova-Taddei and Siddiqui 2016). The company during 1997 was selected by World Economic Forum as one of the most remarkably growing company in India. The company was also ranked 3rd position in respect of corporate governance survey by the Global Institutional investors. Commencement of Problems: The problems in Satyam commenced during December 2008 when the chairman of Satyam publicized a surprise move of $1.6 billion bid for Maytas Infrastructure Ltd and Maytas Properties Ltd. The chairman asserted that he wanted to use the accessible cash for the investors benefit (Shaub and Braun 2014). Thumbs down from the investors and market forced the chairman to withdrawal of bid inside 12 hour span. Satyam share prices fell by 55% relating to the concerns of Satyam corporate governance. The world bank barred Satyam for a period of eight years for giving unsuitable benefits and was also charged with data stealing and corrupting to workforce. The price of share for Satyam also declined by another 14% and was lowest in 4 years (Arens et al. 2016). Finally the chairman of Satyam confessed regarding 7800 crore fraud. A week later the scandalous confession the auditors of Satyam Price Waterhouse lastly confessed that the audit reports provided was incurred and was based on the incorrect monetary report provided by the management of Satyam. Flaws in governance and unethical conduct: In Satyam there was hardly any clear or understood code of ethics that surrounded the business principles of the company (Mohapatra, Graham and Nandialath 2015). Corruption, fraud and exchange of favours both inside and outside of the corporation was the common occurrence. The World Bank was tool late in publicizing the unethical work conduct of Satyam by publicising the data theft charges that was imposed on Satyam and bribing of staff. Following this, Satyam was banded from any trade with World Bank for a period of eight years as the company was charged with giving unfitting benefits to staff. The ethical standards of the company therefore was poor. Evidently, the CEO and the CFO of Satyam were charge for putting forward the self-interest ahead of the interest of the company. The chairpersons were found to be actively selling the large proportion of their shareholdings prior to admitting the scandal of fraud (Narayanaswamy, Raghunandan and Rama 2015). The senior executives of Satyam were found to be behaving in an unethical manner with no instances of moral code of conduct. The behaviour of the top executives provided the evidences of exploitation of corporations funds for private benefit for numerous years. A case of Insider Trading: The investigation reports suggest that the promoters of Satyam computers have engaged themselves in most awful form of insider trading of the Satyams shares to raise cash for creating a large land of bank (Mock, Ragothaman and Srivastava 2018). The funds obtained through shares were employed to purchase lands in the name of the family members with all of the members held equity participation in these companies. The chairperson were held chargeable for using the fund in offloading the shares to purchase their lands. The promoters with the help of inflated books posed a healthy financial situation of the company in the market. During this course of time period the promoters held their purpose to offload their shares on regular breaks. The investigation agencies are puzzled because the deals were struck by the chairman when the market was functioning far below Rs 500. Following the confession of the chairperson the prices of the shares fell to all below of Rs 6.30 (Solieri and Hodowanitz 2016). Even though the chairman of Satyam and chairman of SFIO were separated however discoveries suggest that the chairperson were working together to defraud their stakeholders for the purpose of personal gain. Falsified books of accounts and Fake Accounting: Evidences from the findings suggest that the balance sheet of the Satyam carried on an accrued interest that amounted to 376 crores that did not existed in reality. The false figure of accrued interest was presented in the balance sheet to supress the identification of non-existent fixed deposit based on the inflated profits (Bhasin 2016). Investigations findings suggest that the business had purposely paid the more taxes on account of non-existed accrued interest that constituted considerable amount of loss for company. The company created an untruthful impression regarding the fixed deposits that summed around 3318.37 crore while the company originally held fixed deposits receipts of just 9.96 crore. Negligent board: The lax board system has failed to question the strategy of management and employed leverage in recasting the firm. The board were very slow to react once it was evident that Satyam was in monetary misery (Pai and Tolleson 2015). The lax board overlooked or were unsuccessful to act on the serious info associated to incorrect activities prior to the ultimate collapse of the organization. The aggressive bidding of Maytas companies resulted in strong decline in their share prices and bid as it deteriorated by 55% raising concerns about the companys governance. Though some of the independent director withdrew from the board but by then it was very late. Dubious role of Audit committee: The actual function of audit committee is to make sure that the transparency in the business relating to monetary disclosure and fiscal declarations that provided appropriate, adequate and admirable picture and should be free from fraud and failures (Bhasin 2016). Timely taking of actions by the audit committee for the information supplied by the whistle-blower could have helped in acting as the SOS to Satyam. However, the audit committee chose to maintain silence and did not disclosed the issue to the shareholders and the regulatory bodies. False Audit: PWC was the auditor of the Satyam and was auditing their financial records from the year 2001. The fraudulent role of PWC in Satyams failure raised the question of auditing integrity. Investigation reports suggest that the statutory auditors rather using the mechanism for independent testing employed investigation tools of Satyam and compromised the auditing standards (Solieri and Hodowanitz 2016). The final straw in the deficiencies of statutory auditing standards was in spite of detecting the control shortages in the info system and the risk of disclosure to the scams, PWC elected to maintain silence and did not reported the material fraudulent activities to the shareholders. The global audit head of PWC stated that despite the coverage and the resources of internal audit was not in balance with the business dimensions. PWC simply overlooked the evidences and certified the company (Mock, Ragothaman and Srivastava 2018). The statutory auditors were failure on their part of discharging their roles and duty when the situation of autonomously authenticating the cash and bank balances both in respect of current account and fixed deposits. Conclusion: The fraudulent activities of Satyam has devastated the thoughts of several groups of investors, upset the government and regulators. The scandal raised questions on accounting practices and corporate governance standards. The study evidently puts forward numerous corporate governance problems and audit failures that caused the decline of Satyam. Several such evidences has been noticed in USA, Australia and UK however these nations have strongly reacted to the corporate failures and code of ethics that came to the centre stage. Corporate humiliations and audit failures have triggered reformation in the accounting practices and corporate governance. The primary purpose of the reformation is to gain the investors confidence and preventing the audit frauds by ensuring transparency in disclosure of information. Though the mechanism of corporate governance cannot alone prevent the unethical practices of top management but would help in at least ensuring that such things be detected before it is very late. Reference List: Arens, A.A., Elder, R.J., Beasley, M.S. and Hogan, C.E., 2016.Auditing and assurance services. Pearson. Bhasin, M.L., 2016. 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