Going Beyond Sarbanes-Oxley Compliance: Five Keys to Creating Value

Discusses the factors involved in implementing Sarbanes-Oxley Act of 2002 for U.S. accounting firms. Appreciation of the goal behind the law; Comprehension of the accounting fraud; Aggressiveness in addressing ethical attitudes and rationalization

How Sales Executives Can Avoid Accounting Fraud Allegations

Is accounting fraud only a concern for CEOs and financial executives? This article discusses recent cases in which the Securities and Exchange Commission (SEC) charged Sales Vice Presidents for their role in accounting fraud. The authors offer suggestions to help sales executives steer clear of accounting fraud allegations

The Impact of Enterprise Risk Management on the Internal Audit Function

This exploratory study provides evidence about factors associated with the overall impact of enterprise risk management (ERM) on the internal audit function’s activities. Based on responses from 122 organizations in several countries, we find that ERM has the greatest impact on internal audit’s activities when (a) the organization’s ERM process is more completely in place, (b) the CFO and audit committee have called for greater internal audit activity related to ERM, (c) the chief audit executive’s (CAE) tenure is longer, (d) the organization is in the banking industry or is an educational institution, and (e) the internal audit function has provided more ERM leadership. We offer implications and future research directions

Top 10 Audit Deficiencies

The article focuses on financial statement fraud based on cases wherein the U.S. Securities and Exchange Commission sanctioned auditors for their association with fraudulent financial statements. All of the cases involved public companies, most of which engaged ill fraudulent financial reporting. Only a few engaged in misappropriation of assets or defalcation. The most common problem, alleged in 90% of the cases, was the auditor\u27s failure to gather sufficient evidence. In some instances, this failure was pervasive throughout the engagement while in other instances the allegations were more specific. For example, many of the cases involved inadequate evidence in the areas of asset valuation, asset ownership and management representations. Some cases involved the auditor\u27s failure to examine relevant supporting documents or failure to perform steps listed in the audit program. Overall, this failure contributed to management\u27s success in overstating assets, the most common fraud technique

Research Insights About Risk Governance: Implications From a Review of ERM Research

In recent years, expectations for increased risk governance have been placed explicitly on boards of directors. In response, boards are being held responsible for not only understanding and approving management’s risk management processes, but they are also being held responsible for assessing the risks identified by those processes as part of overseeing management’s pursuit of value. These increasing responsibilities have led a number of organizations to adopt enterprise risk management (ERM) as a holistic approach to risk management that extends beyond traditional silo-based risk management techniques. As boards, often through their audit committee, consider management’s implementation of ERM as part of the board’s risk oversight, a number of questions emerge that can be informed by academic research related to ERM. This article summarizes findings from ERM research to provide insights related to the board’s risk governance responsibilities. We also identify a number of research questions that warrant further analysis by governance scholars. It is our hope that this article will spawn varying types of research about ERM and corporate governance

Just Say \u27No\u27

The article discusses the prevention of financial fraud within corporations and businesses in the United States. The types of individuals named in the U.S. Securities and Exchange Commission (SEC) files are examined. Different fraud techniques are looked at, including sham sales, the recording of conditional sales, and unauthorized shipments. The author discusses the status of firms after fraud disclosure and the implications it has for finance professionals

The Role of Bargaining Style in Public Company Audits

According to prior auditing research, negotiation plans an important role in audit outcomes. General purpose negotiating literature suggests that bargaining styles are an important factor in business negotiations and that bargaining style mismatches between negotiating counter-parties can influence negotiation results. To date, the role of auditors\u27 bargaining-style tendencies in audit negotiations has gone unnoticed in the auditing literature. A study examines the bargaining styles of accountants and managers as measured by the Thomas-Kilmann Conflict Mode Instrument. The results suggest that accountants are predisposed to avoid conflict or accommodate whereas managers are predisposed to collaborate or compete. Recognizing this potential mismatch of bargaining styles should help the auditor to develop more effective negotiation strategies

Audit Committee Effectiveness: A Synthesis of the Empirical Audit Committee Literature

The article describes the factors that contribute to audit committee effectiveness. An effective audit committee has qualified members with the authority and resources to protect stakeholder interests by ensuring reliable financial reporting, internal controls, and risk management through its diligent oversight efforts. The determinants of audit committee effectiveness includes the audit committee composition, authority, resources and diligence. The major U.S. stock exchanges require that audit committees be composed of at least three independent, financially literate directors. Team issues also are relevant when considering audit committee composition. The audit committee derives its authority from the full board of directors, federal law and exchange listing requirements. Authority is viewed as a function of the audit committees responsibilities and influence. Audit committee authority also depends on the audit committees relationships with management, external and internal auditors and the board as a whole. The resource component of audit committee effectiveness highlights that effective oversight is contingent upon the audit committee having adequate resources to do its job. Diligence is the process factor that is needed to achieve audit committee effectiveness

Fraudulent financial reporting: 1998-2007 : an analysis of U.S. public companies

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