As Arthur Levitt, then chairman of the Securities & Exchange Commission, summed up in 2000, well before Enron's failure, "Independence is at the core of the profession, the very essence that gives an auditor's work its value" (2). Auditors can maintain this independence in the face of increasingly close or long-term working relationships with the enterprises they audit; significant research indicates that even accounting firms that generate significant consulting revenue from a company will choose their reputation over their near-term receivables and report errors in its results (DeFond et al
Long-term investors polled about earnings accuracy for companies in 1990 and 2000 indicated that trust in the audit process had slightly eroded, while 34.1% of respondents said auditors had become less independent over that period (Hodge 42, 45)
Since management has a privileged insider's perspective on the company's operations, outside investors looking for a comparable level of transparency into those organizations rely the audit process to assure them that management's claims accurately reflect reality. While management may not misrepresent the truth, the temptation to do so is still too strong to ignore: [Because] those seeking capital want to raise it on the most favorable terms to themselves [and] also have the ability to mislead capital providers about the issuer's prospects for future success, capital providers are inherently disadvantaged in their ability to control, negotiate, or evaluate the terms of offerings and trading prices in public capital markets (Johnstone 1)
1% of respondents said auditors had become less independent over that period (Hodge 42, 45). This, in turn, contributed to the generalized crisis of confidence that accelerated the equity market's declines in the summer of 2002 (Ramirez 68) and eventually drove the adoption of the Sarbanes-Oxley regulatory environment
In addition, the staff should expect auditors to review records regarding the company's bank operations to ensure that internal control procedures are being followed. The third expectation for the staff is for auditors to determine control risk based on a scale from high or weak controls to low or strong controls (Rittenberg, Johnstone & Gramling, 2011, p
Apollo Audit Auditing Apollo Shoes Inventory and Warehousing: Test of Controls Testing the controls that exist in the inventorying and warehousing processes at Apollo Shoes consists of the auditor ensuring that the existing controls actually measure what they set out to measure, and that these measurements reflect that actual movement of goods and materials through the various parts of the business (Arens et al
Other statistics that measure not simply the performance of the company but the physical amounts of resource consumption, time between deliveries, and a variety of other quantitative measures should all be utilized in analyzing the current recorded operational levels of Apollo Shoes and ensuring that they reflect the reality of the business. Cash Cycle: Tests of Controls System, personnel, and direct accounting controls should all be in place at Apollo Shoes in order to ensure that cash is not being mishandled, misappropriated, or inadequately tracked (Coyle 2000)
However, "evidence is inconclusive as to why some local governments include citizen participation in the budget process while others do not." In fact, "little generalizable empirical knowledge" exists or is readily available "about the use of participation in budgeting" (Zhang, Yang 2009)
In fact, it can be recognized, in the majority of elemental arenas, as the most important implement to be used within these disciplines. The statistical approach in representing the relationship between a scalar variable ("Y," dependent variable or regressand) and one or more variables denoted ("X," independent variable or regressor) constitutes the concept of Linear Regression (Tibshirani, 1996)
Each of these makes the use of linear regression inappropriate and signifies the need for an alternative approach. The discussion that follows emphasizes the central argument surrounding the use of logistic regression" (Yang, Miller, 2008)
"Minimizing the sum of squared vertical distances between the observed responses in the data set, and the responses predicted by the linear approximation. The resulting estimator can be expressed by a simple formula, especially in the case of a single regressor on the right-hand side" (Lai, Robbins, Wei, 1978)
The Securities Exchange Commission was in what would become the first phase of overhauling the accounting and auditing industry. In 1998, three significant accounting failures -- Cendant, Sunbeam and Waste Management Corporation -- had focused regulators on the industry (Barr, 200)
The most famous was the Enron scandal. One of the largest and most success firms in the United States, Enron admitted in late 2001 that its accounts for the past three years had essentially been works of fiction (Arnold, 2002)
They control 95% of the American auditing business. That said, many smaller firms have entered the market in recent years (Hodgson, 2007)
The industry remains an oligopoly (without Arthur Andersen now the Big Four). These firms conduct all the audits on the world's major multinationals (Ascher, 2008)
While SOX was designed to improve the role of auditing in the corporate governance function, for foreign firms it is often viewed as an expensive redundancy. English company ICI, for example, chose to delist from the New York Stock Exchange rather than deal with the added burden of modern auditing (Madigan, 2007)
Other companies, however, are not willing to make such changes. Each nation has its own version of Sarbanes-Oxley (Bhisham, 2009)
One of the major governance issues at Tyco was that the company paid its auditors millions of dollars in consulting fees. The company responded by ending the consulting relationship, allowing their auditors to simply conduct that task independently (Cope, 2002)
An example is 'Quality Control for Audit Work', on policies and procedures of an audit firm regarding audit work generally; and for procedures delegated to assistants." (Nicoll, 2005) The standards adopted by the Auditor-General for performance audits are stated to be applicable and the same definition of materiality as for regularity, financial report or financial statement audits
McCollum (2006) reports that eighty accounting, business and financial professionals and academics were interviewed by CPA Australia at a series of Auditing Standards briefings and findings show that seventy-percent of the respondents in the survey state that "the new standards will increase audit costs." (McCollum, 2006) Another seventy-five percent states that "they expect the amount of time needed to complete audits to increase