AUDIT CASE

Toshiba huge accounting scandal

Inflated profits by $1.2 billion & fraud scheme.

Toshiba Corp, its chief executive and president Hisao Tanaka will step down after an independent investigation found he had been aware the company had been inflating its profits over a number of years.

In one of the biggest ever accounting scandals in Japanese corporate history, the investigators' report said the consumer electronics and engineering giant had overstated operating profits by a total of 151.8 billion yen ($1.22 billion) since 2008, claiming numbers that were up to three times the actual level.

“Toshiba had a corporate culture in which management decisions could not be challenged,” according to a summary of the investigator’s report. “Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years.”

It's the second big scandal of its kind in less than four years. In late 2011, executives at camera maker Olympus were accused of orchestrating a $1.7 billion accounting fraud scheme.

In my opinion, although the report point to the systematic problem that reached the upper echelons of Toshiba and the top executives pushed subordinates to meet unachievable financial targets, it also cannot overstatement of the profits and delay in reporting losses in a corporate culture that ‘avoided going against superiors’ wished”. Besides that, because of this case had a blow to the country’s efforts to regain the confidence of global investors. In additional, they had took the responsibility, Tanaka will be replaced by Masashi Muromachi, the group's chairman, according to a company statement. His predecessors, vice-chairman Norio Sasaki and adviser Atsutoshi Nishida, will also step down after being implicated in the report. Toshiba will also appoint a slew of independent directors to its board to strengthen external oversight of its management, but if Japan fails to implement appropriation corporate governance, it could lose the market’s trust. Furthermore, fraud can result in huge financial loss, legal costs, and ruined reputations that can ultimately lead to the downfall of an organization, so it can set a new policy and increase the penalties and punishment to enforcing this type of case happening.

References link below:

http://www.reuters.com/article/us-toshiba-accounting-idUSKCN0PU0E920150720

https://www.nytimes.com/2015/07/21/business/international/internal-panel-says-toshiba-inflated-earnings-by-1-2-billion.html?_r=1

Accounting VS Auditing

Accounting is systematically process of book keeping of an entity and preparation of financial statements at the end of the year that useful for internal and external users. Moreover, accounting capturing the day to day monetary transactions of the business and classifying them into various groups along with that. The main purpose of accounting is to to provide a company with clear, comprehensive, and reliable information about its economic activities and status of its assets and liabilities. There are statements for example the balance sheet, income statement, statement of changes in equity and statement of cash flow. Therefore, accounting can reveal the profitability and sustainability of an organization.

Auditing is the process of reviewing and investigating any aspect of a business, whether financial or nonfinancial to giving an opinion on audit report based on true and fair view. Auditors analyse and compare accounting reports and confirmation documents as well as verify conformity of a company's accounting such as financial statements with established standards and regulations for example US GAAP, IFRS and etc. Therefore, the main goal of an audit is to perform thorough evaluation of a company's financial records and reports and provide a company with improvement recommendations based on that evaluation.

Main Differences between Accounting & Auditing

Firstly, accounting is governed by Generally Accepted Accounting Principles (GAAP) and international accounting standards. In contrast, auditors check for accuracy or material misstatements and their auditing processes are governed by Auditing Standards. Both of accounting and auditing must obey the exclusive standard.

Secondly, in accounting the accountants produce the financial statements at the end of the financial year and it is continuous activity for every year. For auditing, auditors issue an opinion on whether the financial statements of a company present a true and fair when requirements of audit report and which is a periodic activity.

Thirdly, accountants provide financial management and other information necessary for effective decision making in the company. By contrast, auditors are not involved in the management of the company and clearly state in their report that the financial statements are the responsibility of the directors of the company.

Fourthly, accounting is a day-to-day process, while an audit takes place after a fixed period of time or after the occurrence of an extraordinary event such as fraud and etc. Therefore, accounting is necessary for every single business but audit is not necessary and it is optional to choose whether do or not to do the auditing.

Lastly, accountants are usually employees of the company for which they work, whereas, auditors are normally hired from an outside firm to verify the accuracy of the accountant’s work. Although not always the case, an auditor generally has no financial connections to the company unless is internal auditor.

References link below:

http://studypoints.blogspot.my/2011/09/what-is-difference-between-auditing-and_530.html

http://simplestudies.com/difference-accounting-auditing.html

Audit Case in Malaysia

What was this news took about is an audit partner, auditor jailed for one year and fined RM 400,000 for misleading disclosure of Financial information. Abetting United U-Li Corporation Berhad in making a misleading information to the Bursa Malaysia. 

It was the first case happened in Malaysia.Oct 21,2015, this news are happened in Kuala Lumpur. A licensed audit partner was convicted in Kuala Lumpur Sessions Court by today because for abetting a public list company to make a misleading statement in audit result to the Bursa Malaysia. This is an offense under section 122B (b), and (bb) is read in conjunction with section 122C (c) of the Securities Industry Act 1983 and make a misleading statement. 

This United U-Li audited financial results was misleading statement in relation and it financial results profit before tax for the financial year ended was inflation to 26%. The auditor partner was into jailed for one year and have to pay fined of RM400,000 with sentenced to imprisonment for six months due to illegal. This also is the first case happened in the Securities Commission Malaysia was brought the auditor to the court for abetting the public list company to make a misleading information to the Bursa Malaysia. He was indicted in April 2009 and the trial commenced in March 2011. 

Judge said that public interest is the primary consideration for such crimes. He further pointed out that in order to maintain investor confidence and market integrity, this crime should not be underestimated. Above is the news about of audit partner abetting in make a misleading statement to Bursa Malaysia and Securities Commission Malaysia. 

In my personal opinion, I was think about why he wanted to abetting the United U-Li Corporation Berhad in make a misleading statement to Bursa Malaysia and why he want to make himself to jailed? He make a misleading statement to get the financial results inflation to 26% profit before tax for the year ended. May be he wanted to get his financial results to be perfect and excellent so that, he can get more investment, profit and retained earnings. 

To have more investor to investment his company and have a confidence with the company but actually is not a true. This may is he intentions to have a misstatement to Bursa Malaysia. In addition, the public interest also is the first consideration for offences of this nature. It will be happen is because the audit partner wanted to obtain a high public interest, so that he make a misleading statement and abetment the public list company to give the company or that person benefit. For an auditor must know that this is an offense. Should not happened. 

An auditor have to be true and fair view to the financial results, can't be hide the facts, make a misleading to that and it also can't abetting people to make a fraud. He have to give a qualified opinion to his audit result not make a misstatement. This kind of public interest should not be underestimated. It can become a crime. Because of greedy, people will be doing something illegal to give more interest or profit to themselves.

The news are took about what happened occurred in Malaysia. It was about an audit partner. 
Below is the link of the news: 

http://maganzine.coassets.com/2015/10/23/audit-partner-jailed-one-year-fined-rm400000-for-misleading-disclosure-of-financial-information

http://www.theedgemarkets.com/my.article/auditor-jailed-abetting-united-u-li-inflating-profit-figure

http://www.sc.com.my/postarchive/audit-partner-jailed-one-fined-rm400000-for-misleading-disclosure-of-financial-information/

The Importance of Audited Financial Statement

At first, financial statement is helpful for users no matter internal users or external users and they need to go through the financial statement to check the sustainability of the specific company. Therefore, an audited financial statement can leads accuracy of the information or statement in financial statement make users feels that can fully trust and rely on the information which is audited.

Why an audited financial statement is importance of a business firm?

Firstly, audited financial statement is able to determine the reliability of information. Every business is required to appointed auditors to analyze their financial statement of company that auditors in order to form an opinion about their financial well-being. Moreover, as auditors stand responsible for their role and tasks, they will consider an organization will put funds at risk with the business. Since auditors have the right to subject the financial statement, therefore auditors are purposely to do that which is investigation. Company need to face rigorous professional examination where auditors prudently go through the company’s books and records which is information. Furthermore, conduct an external audit by a qualified public accounting firm will satisfy most questions about the reliability of its financial.

Secondly, companies are required by law to issue audited financial statements and the audited financial statement is either to satisfy the requirement of certain external or internal users, bank, investment firms and includes in lieu of employing internal auditors. By the way, the board of directors are responsible to go through selection of auditors that hire an auditing team based on it solely name and ensure that it is well-qualified and has experience in the company's industry when company plans to conduct an audit. Moreover, conducting an audit of financial statement is considered a matter of planning which is the process of observation, inquiry and inspection of internal financial books and records. Auditors undertake various tests, such as requesting confirmations of orders from a sampling of customers, to prove the accuracy of items in the financial statements and etc.

Lastly, audited financial statement is important because auditors have to conduct an audit opinion based on the audited financial statement to prove the current condition of the specific company. Auditors are taking different period to fully audited a company depends on the size and complexity of the company being examined. After audited the financial statement of company, auditors will found out whether the company have obey the standard of GAAP or not and state in the audit report which includes audit opinion. Furthermore, there are few types of audit opinions include unqualified opinion and qualified opinion to determine the condition of company. As information, unqualified opinion means that materials were in order and met all auditing requirements and qualified opinion is means the statements do not accurately reflect the company's condition or company didn’t obey the required standards.

Reference below:

http://yourbusiness.azcentral.com/importance-audited-financial-statements-business-firm-17757.html

Audit Opinion

An auditor's opinion is a certification that accompanies financial statements based on an audit of the accountant's opinion of the procedures and records used to produce the statements regardless of whether material misstatements exist in the financial statements. There are generally four types of audit opinions rendered in accounting.

Unqualified Opinion

An unqualified opinion is also call as a clean opinion. An unqualified opinion is an audit report that is issued when an auditor determines that each of the financial records provided by the organization is free of any misrepresentations. In addition, an unqualified opinion indicates that the financial records have been maintained in accordance with the standards known as Generally Accepted Accounting Principles (GAAP). This is the best type of report a business can receive. Typically, an unqualified report consists of a title that includes the word “independent.” This is done to illustrate that it was prepared by an unbiased third party.

Qualified Opinion

A qualified opinion is given when a company’s financial records have not been presented in accordance with GAAP but no misrepresentations are identified, an auditor will issue a qualified opinion. The writing of a qualified opinion is extremely similar to that of an unqualified opinion. A qualified opinion, however, will include an additional paragraph that highlights the reason why the audit report is not unqualified. 

Disclaimer Opinion

On some situation, an auditor is unable to complete an accurate audit report because of a variety of reasons, such as an absence of appropriate financial records. When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of the firm’s financial status could not be determined.  A disclaimer of opinion is not an opinion itself. 

Adverse Opinion

A disclaimer of opinion means that due to a significant scope limitation, the auditors were unable to form an opinion or did not form an opinion on the financial statements. An adverse opinion indicates financial records are not in accordance to GAAP and are grossly misstated. An adverse opinion is an indicator of fraud, and public entities that receive an adverse opinion are forced to correct their financial statements and have the financial statements re-audited. 

References
http://yourbusiness.azcentral.com/types-audit-opinions-rendered-accounting-3557.html
http://www.investopedia.com/terms/a/auditors-opinion.asp

Fraud & Error in Auditing

In my understanding fraud is dishonesty calculated for advantage and a person who is dishonest may be called a fraud, fraud is a specific crime with certain features. As I know fraud is most common in the buying or selling of property and intangible property, such as copyrights. 

And in my understanding of error in accounting item that was not caused deliberately, accounting error can include discrepancies in dollar or might be an error in using accounting policy incorrectly. And accounting error are should not be confused with fraud, which is intentional error in an accounting item, usually to hide or change data for personal gain.

There are some common errors example, for example like an advertising expense shows up as a miscellaneous expense, the data entry clerk made a simple keying error. And also if recording a deposit as a payment in account or recording the payment for the wrong date or wrong amount is also an error. 

When fraud happen, that will be occurs when someone purposefully produces deceptive data. There have two type of fraud, first is misstatements due to fraudulent financial reporting. For this type of fraud usually management or owners are involved in the case and the fraud is stimulate by overriding internal controls. And the second misstatements is because of the embezzle of assets, for this type of fraud is usually offend by non-management employees.

Big 4 Accounting Firms

The frist of the Big Four accounting firm is Deloitte Touche Tohmatsu Limited (Deloitte), Deloitte is a UK incorporated transnational professional services firm with operational headquarters in United States New York City. Deloitte is also the largest professional services network in the world by revenue and the number of professionals. Deloitte provides consulting, auditing, tax, enterprise risk and financial advisory services in globally, they drives progress their firms is around the world to help clients become a leaders whenever they choose to compete. 

Second, talk about PricewaterhouseCoopers (PwC), PwC is a multinational professional services network and their headquartered in London. It is the second largest professional sercices firm in the world and PwC is also the one of the Big Four accounting firm along with Deloitte, Ernst & Young, and KPMG. The company was formed by the combination of two large accounting firms it is Price Waterhouse and Coopers & Lybrand, the two decided to combine in 1998. PwC firms operate in different countries around the world, they operate like other international companies, and they also share common values and standards. PwC provides excellent assurance, consulting, and tax services.

The third accounting firm is create by Ernst & Whinney, and he amalgamate with Arthur Young create Ernst & Young in 1989. E&Y is a global organization of member firms in more than 150 countries. It employs people equipped with professional skills and values of respect, teamwork and motivation. The organization also values knowledge and skills development, helping all employees achieve their potential through professional training and career growth programs. E&Y is a global leader in assurance, tax, and advisory services.

The last of Big Four is Klynveld Peat Marwick Goerdeler (KPMG), KPMG is also a global network of accounting firms providing advisory, audit, tax, and industry specific services. This organization was formed in 1987 through the combine with Peat Marwick International and Klynveld Main Goerdeler (KMG). KPMG is operate like other professional service organizations, KMPG places a great value on it people and quality of service. KPMG can help the client organizations deal with the accounting planning involved in new regulatory compliance initiatives and including a new accounting standards or regulatory pronouncements.

Refrences

https://www.linkedin.com/company/deloitte

https://www2.deloitte.com/my/en.html

http://www.pwc.com/

http://www.ey.com/

https://home.kpmg.com/xx/en/home.html

Audit Evidence

What is Audit Evidence? First of all, Audit Evidence is the evidence that obtained during the financial audit. They used by the auditor in arriving at the conclusions on which the auditor's opinion is based.

Therefore, they are consists both information that supports and corroborates management 's assertions regarding the financial statements or internal control over the financial reporting and information that contradicts such assertions.

However, they included types of audit evidences such as, inquiries of the client, documentation, analytical review procedure.Firstly, documentation is the examination the client's supported the documents. Only support internal and external documents. Secondly, inquiries of the client for this standard they only oral or written the information from the client they will do the confirmation by others sources.Thirdly, is the analytical review procedure is to comparisons of the recorded amounts to establish the industry average and make the auditor's understanding.

In addition, the audit evidence they also include 7 type of regular role such as:

• Relevance - must pertain the audit objective being tested
• Independence - evidence form outside the client is a stronger form of evidence
• Effectiveness of client internal controls - good internal controls can mean better information
• Auditor direct knowledge - auditor determinations are stronger that client comments
• Qualifications - individual is a qualified source
• Degree of objectivity - objective evidence is stronger than subjective evidence
• Timeliness- balance sheet account evidence is better when it collected around the date of the financial statement, income statement evidence should sample entire period.

The sources of evidence

References:

https://pcaobus.org/Standards/Auditing/pages/auditing_standard_15.aspx

http://www.investopedia.com/terms/a/auditing-evidence.asp

https://www.slideshare.net/osamarizvi/9-audit-evidence

                                                  The video of Definition Audit Evidence 

Understanding Of Auditing

What is an audit? Auditing is usually conducted by an independent agency to conduct an official check of an organization's account. Therefore, it is not possible to audit each fraud case. Conduct official financial checks on the company or its account.

In fact, auditing them is a fair examination, they will always evaluate an organization's financial statements. It can be done internally, such as an organization's employees or an external company. Thus, auditing refers to an organization's systematic examination of books, accounts, documents and vouchers to determine the financial statements on the concerns of the real and fair views.

The meaning of auditing, is an accountant who conduct an audit they must verify the accuracy of the financial report and accounting practices of the business and government. They are officer duty and examine the accounts, received the money from public. For example, shareholders and check the all records transactions of the management. 

Furthermore, the purpose of audits is to specialize the types of audits based on the audit purpose. For example, to verify the compliance, conformance or performance. By the way, some audit they also have special administrative purpose. Such as, auditing documents, risk or performance or following up the completed corrective actions.

In others situation, in internal audit they also have included some regular role that internal audit responsible. For example, evaluating the relevant risk factors associated with the key activities, analyzing operations and confirming information, working closely with line managers to review operations and report findings or reviewing the compliance and due with the diligence procedures, evaluating the report and effectiveness the efficiency of the implementation of management policies, evaluating the internal controls and advising the managers at all levels.These all will be responsible by internal audit.

Besides that, the internal audit will ensures that the organization is adhering to the rules, regulations, laws, standards, codes of ethics, guidelines and principles apply, individually and collectively, to all parts of the organization. 

In addition, they are also include financial audits objectives such as:

• Ascertain the validity and reliability of information
• Provide an assessment of a system's of internal control
• Express an opinion about a person, organization or system under evaluation

References:
https://www.skillsportal.co.za/content/introduction-auditing
https://www.slideshare.net/shub-singhania/gaurav-mida-3238
http://www.a-countingbiz.com/auditing-explained/

http://asq.org/learn-about-quality/auditing/

Introduction

Members

My name is Lee Ching Ching my course is Diploma In Accountancy. Why i will chose this profession? Because my mother. At first, just graduated i am confused about the future. On that time, my mother suggest me study accounting, she felt is was easy to find a job in the industry and is stable career.

In addition, she felt that accountant is very suitable for me. Because, for my own personality is very introverted shy and not good for conversation, not enough of confidence. So, my mother recommended me to do accounting.

The first advantage is i can lean a lot of things, more knowledgeable. Secondly, can learning to be a sense of responsibility, time management, discipline and confidence. Therefore, i chose accountant profession.

Besides that, when i was started contact accountancy? Officially is started from college. So the accounting skill still relatively unfamiliar and not enough skilled. But, right now currently contacted for two years. Be a bit more confidence and improve compare to last two years. But still need to advancement.

Furthermore, for my understanding accounting is very complicated, very challenging, very rush, no time to break is a very pressure profession. Right now, i chose account have a bit of regret. Initially, i chose the purpose of accounting just only to learn new things. Did not expect that, this industry is very exhausting and challenging. So now  after i get in touch, i told myself that accounting can never be my lifetime career. In future, i think i will change new career to be my lifetime career.

However, for my understanding auditing. As before, i felt that very complicated very exhausting very rush and no time to spend is a very changing profession. For me i will not chose this career to be my lifetime career.

My name is Joey Chow Pui Yee, taking diploma in accountancy. The reason that i will choose accountancy is because after graduate can work in any industry in the world.

In all industry, as long as money makes it go round, they all need accountants, no matter what passionate about or where on earth I like to live, I’ll be able and easy to find work in accounting.

In my understanding audit is an objective examination of the financial statements of an organization to make sure that the records are fair and audit helps in knowing the true financial position.

When I’m studying this subject it is very difficult and hard to understand, because this subject is fully theory and say it honestly auditing is a very boring subject. Every time when the class dismiss, I’m still not so understand the topic that lecturer teach, so I have to spend more time in home to study back the topic and try to understand it.

My name is Liew Sze Mun and taking Diploma in Accountancy. Why I'm choose this course is because easy to find a work after graduate in any industry and have a stable salary. I'm also know that many industry need to vacancy a accountants. 

For my understanding, accounting and audit this two subject was very hard to understand especially is audit. Audit is a very difficult and hard to understand subject, and it is record a fair and accurate representation of the transactions. Need to understand what is audit may spent many time to study and understand apart from this the word is also very esoteric. 

Become a auditor you need to be more learning and knowledge in this subject to understand. As I know auditor have two types it is internal and external auditor. What they do is to check the financial statement and others document. In addition, we need a full focus on the subject to understand how is the audit.

My name is Shut Kar Yee, studying Diploma in Accountancy in Erican College. The reason that I chose Accountancy is because some suggestion and recommendation from my sister. Furthermore, future is unpredictable that I won’t know how the economic will go in the next few years. But account is popularization that every industry will need it at anywhere at any time.

In my understanding, accounting is a set of simple calculation method to compute and analyse the financial performance of an organization. And, I thought auditing is only check the financial information in financial statement and make sure all the finance information is tally and statement is correct.

In fact, accounting and auditing is not that simple as I think, it is complicated that broad and profound. I will be able to learn and absorb many accounting knowledge through this accountancy course and it might be very helpful when I step in social and started my work life. 

My name is Teh Yi Chian, studying Diploma In Accountancy in Erican College. I didn’t really choose Accountancy to begin with. The reason I’m studying Accounting is because of my parents suggestions and I’m also have some interest with orientation towards numbers. 

Moreover, accounting is the fields where there is a rule for everything. It’s a major that can lead into a career field that includes high pay and a very visible position both in organization and in the community.

Accounting is a process of recording the business transaction and presenting the company financial data. Auditing is the process of reviewing and investigating any aspect of a business, whether financial or non financial. 

Accounting and auditing are both essential business functions which, while distinctly different concepts, can interrelate at times. Understanding accounting and auditing will help me enable to further develop the skills, knowledge, and career options.