News from Airstrip One: Violation of Independence

                                                 

The AKKA accounting qualification has been revoked for the partner, senior manager and manager who worked in audit firm KTC33. The investigation has been opened by firm ethics committee. The secret sources from KTC33 say that audit senior had a conflict with partner regarding preparation of cash flow statement for client. Partner asked audit senior to prepare the cash flow statement to speed up completion of audit. However the audit senior disagreed and reported the case directly to AKKA ethics committee. Management of KTC33 decided not to defend partner and fired audit team management. Our correspondent, Rob, asked for the comments from the audit specialist, Mr Task, in the city of Airstrip One:

• Rob: Is it common case when audit team in fact assists client to prepare financial statements instead of auditing them?
• Mr Task: These cases happen when client personnel do not understand value of audit and not motivated to supply audit team with evidence and deliverables. Audit firm partner should do his/her best a) to understand if client ready to have audit, including if the accounting personnel can provide adequate audit evidence; b) to explain the client the nature of services provided by audit firm. 

Disclaimer: all situations and names in this blog post are not real.

Week-end: Dialogue with manager

I found a funny video on Youtube. May be it is not very attractive in terms of special effects but dialogue does reflect the communication patterns with audit managers in some cases J

Recommended for all audit firm new joiners J

Coffee Break: Big Red Button

I have recently met a colleague at a coffee break. He is assigned at the moment at one of those really messy audit project: the work papers are 50% prepared, conclusions are not clear, work books hard to follow. This made him writing a lot of review comments and to do lots of corrections himself.

As we were going on with our small chat we had a very fresh idea :) The thing is that the work of re-doing something after somebody has already done something incorrectly is so frustrating in audit and in other intellectual jobs. So we suggested that as soon as an audit senior is being promoted to manager level he/she should be supplied with the laptop with just one big red button "Please, re-do!" to write review comments easily. Whenever you push this button it would generate this only comment: "Please, re-do!". :)

Probably the laptop* would look like this one on the pic :)

*Apple Introduces Revolutionary New Laptop With No Keyboard

Week-end: My Fuhrer, the client sent us new PBCs

This is audit theme of dubbing & subtitling of classic German film “Downfall”* (original “Der Untergang”). I find it very funny, I think such moments happened with every audit manager or partner who received  unpleasant surprise just before deadline J

*https://en.wikipedia.org/wiki/Downfall_(2004_film)

**PBC –  is abbreviation for “Prepared By Client”.  It is the evidence provided by client to support figures and other financial information presented/disclosed in financial statements

News from Airstrip One: Promotions case

The investigation has been opened regarding integrity of promotions in the audit firm KTC33. The investigation was triggered by the embarrassing fact about the audit partner in KTC33 who advocated for promotion of one of his mistresses (Jenny): from audit manager to senior manager. The interesting moment is that the fact was reported to the firm management by his another lover (Kelly). She was jealous of what was happening and decided to revenge. Kelly reported of number of similar cases when promotion  was gained “through bed” or other non-professional activities regarding other partners. Our correspondent, Rob, asked for the comments from audit specialist, Mr Task, in the city of Airstrip One:

• Rob: What could be done to prevent such cases in the Oceanian audit firms? Should firms inspire whistleblowing in case of any relations at job?

• Mr Task: I do not think we need to inspire unnecessary whistleblowing. People might become too focused on somebody’s sins and not on their own. What I suggest we can put some procedures to mitigate such risks. For example, we might establish system where voice of one or two partners would not be decisive. I think, the investigation is just invitation for broader discussion about the systems used by audit firms to assess employees.

Disclaimer: all situations and names in this blog post are not real.

Week-end: Monty Python

Here is a video from old good Monty Python on audit! I liked this joke, sounds all old good British and rather funny J

I wonder what was the audit firm's materiality basis on that engagement with such profit??? J

News from Airstrip One: Toxiba case

Toxiba company, one of the biggest in the region of Eurasia, apologised for using fraudulent methods of inflating its profit. The company artificially increased its profits by USD 1.2 bln during preceding 7 years.  The technique of defrauding financial statements was not innovative and referred by Capitalist (magazine in Oceania) as “101”. This usually includes overstating net revenues, booking early revenues and postponing expenses. The company had the auditor R&U, which failed to detected fraud. R&U is multinational company founded in Oceania, having offices in all big cities, including Airstrip One. Our correspondent, Rob, asked for the comments from the audit specialist, Mr Ask, in the city of Airstrip One:

• Rob: What could be done to prevent such cases?
• Mr Task: Well, first of all the corporate culture in Eurasia should change towards being more open and this depends from tone at the top. Second, I think the auditors from R&U should review their fraud detection and cut-off procedures, and then, question themselves, why they were not able to find the intentionally made errors.

Disclaimer: all situations and names is this blog post are not real.