Auditing Regulations in the UK

Auditing Regulations in the UK Introduction Following the financial disasters that led to the collapse of corporations such as Enron and WorldCom, international and national regulators sought to strengthen legislation relating to the internal and external auditing of corporations. This resulted in the introduction of a number of international and national Acts and enforceable codes, commencing with the Sarbanes-Oxley Act 2002[1] in the US (www.sarbanes-Oxley .com). In the UK the government introduced the Combined Code (FSA 2006) in 2003, which has subsequently been revised and strengthened, and revised the Companies Act (2006). These became the foundation for corporate governance and appropriate auditing procedures. This paper seeks to evaluate the effectiveness of this regulatory framework in creating an auditing environment that will prevent a repeat of the disasters that led to their introduction. This will follow a brief overview of the auditing processes is provided initially. The Audit Process There have been several definitions of the term audit; perhaps the most succinct of which is that based upon the American Accounting Association’s, which states that: â€Å"Auditing is a systematic process of objectively gathering and evaluating evidence relating to assertions about economic actions and events in which the individual or organisation making the assertion has been engaged, to ascertain the degree of correspondence between those assertions and established criteria, and communicating the results to users of the reports in which the assertions are made.† Porter et al (2003, p.3). In other words, the task of an auditor is, through the use of a structured programme, to gather evidence relating to the financial statements made by a corporation, evaluate the accuracy of the statements made in the light of this evidence and also to ensure that any opinions and reports presented are in accordance with the prevailing rules, regulations and criteria. They then have to present a certified unbiased view of their findings from the audit to external stakeholders, such as the shareholders and government authorities (See figure 1). There are several types of audits conducted throughout an organisation. However, this paper concentrates upon the external and internal audit. A licensed and qualified firm of auditors, whose independence from the organisation must comply with the definitions set out the combined code and accompanying guidance notes, carries out an external audit. The essential purpose of the internal audit is, in the words of the Institute of Internal Auditors (Spencer-Pickett 2003, p.2), intended to â€Å"improve the effectiveness of risk management, control and corporate governance processes.† Whilst the intention of this process, as with external auditing, is to provide and independent assurance on these processes and controls, the internal audit personnel are employed directly by the corporation. Current regulations The auditing process relates to most corporations (Gray and Stuart (2004), but this paper concentrates upon the Public Limited Company. In respect of financial reporting within the UK, commercial organisations are governed by the rules of the Combined Code (2006) and the international reporting standards set by the IFA[2], as explained within their handbook (2006). Combined Code The combined code concentrates upon five areas of the corporation’s activity and internal structure. These include: Directors – which include advice on suitability, proportion of executive to non-exec directors on the board and their roles and independence. It also defines a clear distinction of duties between CEO and Chairman. Remuneration This relates formula for the make-up and levels of director’s pay, together with the inclusion of an independent remuneration committee. Accountability and audit –Requires the board, through an independent audit committee, to maintain an adequate system of internal control that should be audited, the selection and independence of external auditors and outlines the process of accountability of the organisation to the various stakeholders. Relations with shareholders – Outlines the responsibility of the board to its shareholders and the reverse. This section of the code also sets out the requirements of the board to include the shareholders rights within their voting and operating procedures. Institutional shareholders – Section E of the code concentrates specifically upon the relationship that exists between the board and its institutional shareholders and outlines the dialogue that should occur between the two stakeholders of the business. IFRS Perhaps most important aspect of the financial reporting and auditing process is contained within the FRS[3] and SSAP[4] (ASB 2007) regulations, the former of which are based upon the international standards, which have been subjected to a series of amendments in recent years. Main Objective The Main IFRS objective is to promote a universal financial reporting standard, with the intention of providing an equality of financial information that can improve comparison and reliability of content on a global basis. In addition, the standards set out to increase the trust and reliance on financial reporting system, thus reducing the likelihood and potential risk of financial disasters such as Enron. Other objectives The objective of IAS 1:7 is directly related to the provision of financial information to be used for investment or other economic reasons, such as acquisitions. As such it concentrates upon the reliability of the accounting and reporting standards for the Balance Sheet and Cash Flow statements. Therefore, it focuses on a fair representation, attracting significant importance to the â€Å"fair value† of assets, liabilities and equity, allowing interested parties to ascertain the current real market value, thus making â€Å"historical cost accounting† redundant. Company officers have to prepare and sign compliance statements in terms of the veracity of the information and internal controls operated by the corporation and there must be a separate external audit certificate. The IFRS measurements are applied to each of the standards, although there is intent to introduce measurement as a separate application[5]. However, at present IFRS 2, relating to share based performance has specific measurement guidelines, as does the IFRS relating to the treatment of fixed assets, Here the initial measurement is the acquisition paid, but in later reports these values must reflect a fair current market value, unless there is a reason for this not being possible. In general, the measurements require a â€Å"current fair value† model to be used The presentation of financial statements and disclosures is also addressed For example, the Balance Sheet must contain at least sixteen lines (IAS1.68), which include tangible and intangible assets, current and future liabilities and a breakdown of the equity structure. IAS 1.81 provides the requirements for the income statement including revenue, costs, profit or loss and its distribution. As shown within the list of standards prepared by Deloitte (2005), in addition to the above there is a range of other requirements, including risk assessment corporate governance regulation compliance. If any disclosure cannot be made a certified statement has to be prepared by management and included within the financial reports giving the reasons for this omission. The major task for external auditors is to certify the accuracy and compliance of the statements, and the effectiveness of internal controls ensure efficient business management and a secure level of protection for investors and shareholders exists. Where risks exist, this must be identified with recommendation for actions. Concerns In spite of the regulations and codes, there are still concerns being expressed by investors and shareholders. These generally fall within three categories. Auditor competence and independence A recent survey shows shareholders are concerned about the external auditors. This focuses on their independence, experience and suitability and compliance with procedures. Independence of internal controls Similar concerns are being expressed regarding the internal controls and auditing process. Shareholders are not convinced that the level of effectiveness in identifying fraud and risk is effective or transparent enough and are thus seeking an expansion of financial reporting statements (John Lorinc 2002). Shareholder concerns are supported by research at the university of Auckland (Cheung and Hay 2004), which particularly showed auditor independence to be a major concern to investors. Fair value The concept of â€Å"fair value† is another issue causing disquiet. To date, the IFRS do not have a single definition for the term. Therefore it becomes subject to independent expertise and opinion. However, the fact that such opinions can vary significantly means that the level of reliance on â€Å"fair value† is considerably reduced. Conclusion As can be seen from this evaluate, whilst the IFRS’s go a long way towards addressing the issues surrounding the accuracy, reliability and honesty of financial reporting, the issues of â€Å"fair value† and auditors independence are still a major concern in the minds of investors. This is supported by events such as the near collapse of Northern Rock PLC in the last quarter of 2007, which shows that that there are still inadequacies within the reporting standards that need to be addressed. In this case there are questions to be asked about the interpretation of â€Å"fair value† and the internal controls. By inference, this must also raise the issue of auditor suitability. References ASB (2007). Accounting Standards and Practice. Retrieved 30 November 2007 from http://www.frc.org.uk/asb/technical/standards/accounting.cfm Cheung, Jeff and Hay, David. (2004) Auditor Independence: The Voice of Shareholders. Business Review. Volume 6, issue 2. University of Aukland. Copnell, Timothy (Director) (2006). Shareholders’ Questions 2006. Audit Committee Institute KPMG LLP. UK Deloitte (2005). IFRS 7: A disclosure checklist. Retrieved 28 April 2007 from http://www.iasplus.com/fs/0510ifrs7checklist.pdf FRC (2005). Guidance on Audit Committees (The Smith Guidance). Financial Reporting Council. London, UK. Gray, Iain and Manson, Stuart (2004). The Audit Process: Principles, Practice and Cases. Third edition. Thomson Learning. Handbook of International Auditing, Assurance, and Ethics Pronouncements. (2006). International Federation of Accountants. New York. KMPG (2005). KMPG International Survey of Corporate Responsibility Reporting 2005. Retrieved 29 June 2007 from http://www.eldis.org/go/display/?id=19513type=Document Lorinc. John (2002). After Enron. CA Magazine. Canada. December 2002. Porter, Brenda., Simon, Jon and Hatherly, David (2003). Principles of External Auditing. John Wiley and Sons Ltd. Chichester, UK. Sarbanes-Oxley (2002). Retrieved 29 November 2007 from www.sarbanes-Oxley.com Spencer-Pickett, K.H (2003). The Internal Auditing Handbook. John Wiley Sons Inc. New Jersey, US. The Committee on Corporate Governance (2006). The Combined Code on Corporate Governance. Financial Reporting Council. London. Footnotes [1] Also known as the â€Å"Public Accounting Reform and Investor Protection Act of 2002† [2] International Federation of Accounts [3] Financial Reporting Standards [4] Statement of Standard Accounting Practice [5] see http://www.iasb.org/Current+Projects/IASB+Projects/Fair+Value+Measurements/Fair+Value+Measurements.htm

Ken Kesey’s One Flew Over the Cuckoo’s Nest Essay

I. Introduction The book One Flew Over the Cuckoo’s nest is the result of Ken Kesey’s own experience during his work in mental institution in late 1950s. This book reflects the themes of individuality and rebellion of that time that include protest against conformity. It is the story of one small rebellion that was successful through a big sacrifice. The book is largely symbolic and many characters and things in it are allegoric. II. Body Rebellion is the major theme in the book. It is shown as a confrontation between protagonist Randle McMurphy and antagonist Nurse Ratched. Before McMurphy entered the ward, it was the small structured society of mentally ill patients ruled by powerful Nurse Ratched who weakens them by psychological manipulation. There is no chance that anybody would defy her. After the arrival of McMurphy the situation changed dramatically because this patient is sane and has a strong personality. The figure of McMurphy is symbolic in the way how he sacrificed himself to let the patients realize who they are and regain their spirits. The narrator of the story, Chief Bromden, realizes that he is not weak and breaks free from the ward. McMurphy is compared to Christ in many ways: he is sacrificed, crucified on the table with electroshock; he gathers disciples around him and arranges the fishing trip as Christ who led his twelve disciples to the sea to test their faith. III. Conclusion The book has made a big impression on me in the way how individuality is confronted with the submission and conformism. It teaches rebellion against humiliation of human nature. However, I dislike the author’s view of women as the castrators of men in this book. Nurse Ratched is portrayed as a horrible creature who has no feminine features about her. I liked the figure of prostitute Candy, although she is shown only as the means to relieve Billy Bibbit. Having many symbols and allegories, this book makes us think and not only entertain ourselves.

Essay about Robotics and Automation in Industries

When people think of robots, an image of a mechanical, stiff, talking, moving, human-like machine might come to mind. Robots are, in fact, computerized machines that are ultimately utilized to simplify larger scale tasks. They include control machines, computer controllers, or microprocessor based automated systems just to name a few. The ultimate goal of industrial engineering is to expedite processes; therefore, with such developed and modern technology, the manufacturing process is more efficient, cost effective, and there is almost no human error. With all its benefits the automation and robotics movement has made way for new fetes and greater prospects in economic terms for large-scale firms. The idea behind robots and their uses†¦show more content†¦This device was used in bomb diffusions and in handling dangerous substances like radioactive materials. With time, these machines went from total mechanical operation to mechanical operation with the addition of electronic feedback control. That being said, these devices were actually used in Atomic Energy Commission around the 1940s. The robot is a mechanical manipulator whose motions are controlled by programming techniques very similar to those used in numerical control. Cyril Walter Kenward and George C. Devol are two names in robotic history that deserve recognition; both renound scientists built robotic devices as early as the 1950’s and had their devices patented in 1957 and 1952 respectfully. Their brilliant ideas were later driven forward, and one man in particular, Joseph F. Engelberger, was the â€Å"catalyst† to Devol’s idea when they crossed paths in 1965, when discussion of the Unimate began. By 1962, they came together once again to start the Unimation Company. 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Ethics on Nitendo - Free Essay Example

Sample details Pages: 1 Words: 414 Downloads: 10 Date added: 2017/09/14 Category Advertising Essay Did you like this example? Nintendo has the opportunity to plan, organize, lead and control the way their games will be made on a yearly basis. When planning the types of software and accessories for the games each plan must be ran by the production company and the President of the Company to make sure that the right age group, ethics code and the graphics are made properly. Organization of the games and game system takes some time to get placed into the stores who all sell Nintendo products. Don’t waste time! Our writers will create an original "Ethics on Nitendo" essay for you Create order Ethics comes a long way between the outside stores and the in line stores such over seas like Japan or China who has a piece of the stock from the company. Ethics at Nintendo means that any employees who copy’s software products and sell the games or system he or she will become warned. After their first warning attempt there will be a second warning, and then a final written warning and then termination from the company. Ethics states that anyone who is doing good or bad, right or wrong needs more training on how to cooperate with others and the management team. Being able to work well with others and the customer’s is a must when in retail. Ethics is hard to come by in all business including Nintendo. The President and his Managers must come up with how their managers should lead teams and how they should control each situation. At Nintendo have different store levels, management levels. When defining Ethics we would have to define ethics with leading those are underneath managers should teach how to behave at a company when working in a business. As the managers take control he or she must understand that each employee has a different level of training when training with the code of ethics with Nintendo. However, being managers takes time and pride with the company to keep his or her team players in line. We believe Nintendo so far has a good way of handling Ethics when it comes to planning, organizing, leading and controlling. Nintendo must implement new rules and regulations on how ethics is brought to the table to handle customers and employees. Ethics is strong, when it comes to the business point of view. None the less, in consideration managers have to dedicate their time to help employees understand the company’s policy so that they will not make any mistakes while under the Ethics program when making the video grams or the systems.