...Report on Corporate Frauds & the Role of the auditors: Bangladesh Perspective Faculty of Business Studies University of Dhaka SUBMITTED TO Tahmina Ahmed Lecturer Accounting & Information Systems University of Dhaka SUBMITTED BY Group 18 Date of submission:10.11.14 Group members Name | ID | 1.Sajjad Hossain Sohan | 18022 | 2.Rubina Akther | 18048 | 3.Mohammad Saadman | 18052 | 4.Rumi Akther | 18066 | 5.Hilary Talukder | 18099 | November 5, 2014 Tahmina Ahmed Lecturer Dept. of Accounting & Information Systems University of Dhaka Subject: Submission of report on “Corporate fraud & the role of the auditor: Bangladesh Perspective” Dear Sir, We are honored and pleased to inform you that as per the requirements, we worked on the issue of the preparation of a report based on the corporate frauds & the role of the auditor in Bangladesh perspective. To fulfill the report objective, we analyzed & reviewed some of the secondary information available on the internet related to the topic.. Based on our classroom knowledge on the related issues, we tried to make the report as specific and unique as possible. We humbly submit this report for your review and feedback. Preparation of this report demanded a minimum level of working knowledge of the process of audit & assurance . We also tried to follow your instructions properly now and when necessary. We would like to request you to allow us to submit...
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...Table of Contents Introduction……………………………………………………………………………………..1-2 Issues………………………………………………………………………………………………2 The Discovery of Fraud……………………………………………………………………..…..3-4 Corporate Governance of FCB……………………………………………………………………5 Auditor Dilemma……………………………………………………………………….……….5-7 Using the Fraud Triangle Model to analyze the situation in Flat Cargo Berhad……………..…8-9 Who is responsible in the fraud of Flat Cargo Berhad ……………………………………..…10-11 Prevention Measures for Fraud ……………………………………………………………….12-13 Detection Measures for Fraud…………………………………………………………...……14-15 Recommendation…………………………………………………………………….……….16-17 Conclusion…………………………………………………………………………...……….18-19 References………………………………………………………………………………………..19 Introduction The case is related to one company known as Flat Cargo Berhad (FCB), FCB was one of the largest air freight companies in Malaysia which servicing several government linked companies including Freight Malaysia Berhad. FCB is a listed company and was registered as an investment holding company with several subsidiaries. Among its subsidiaries are FC Spare Sdn Bhd, Cargo Management Sdn Bhd, FCB (SPV) Ltd, Cargo Air Services Sdn Bhd and FC Air Ltd. FCB started its operations in 1997 with two aircrafts: a Boeing 737-200F and a Cessna Grand Caravan. FCB’s major shareholder in 1997 had been Bangor Berhad, which was part of a diversified international family owned conglomerate, the Miri Group. On September 2001 the company was listed in Bursa Malaysia. The...
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...“Critically discussed if there are real reasons why institutional investors should be concerned about the independence and genuine effectiveness of the audit function? Search the findings of academic papers and other published sources to support your view.” Introduction An institutional investor is an organization that invests on behalf of the organization’s members. These investors are a part of corporate governance for companies and they have large amounts of money to invest. In Malaysia, there are five leading institutional investors; Employees Provident Fund of Malaysia (EPF), Pertubuhan Keselamatan Sosial (Social Security Organisation), Lembaga Tabung Haji (Pilgrimage Board), Khazanah Nasional, Permodalan Nasional Berhad (National Equity Corporation) and Lembaga Tabung Angkatan Tentera (Armed Forces Fund Board) have taken various measures over the years to put better governance practices in their investee companies. As they can afford to buy more shares and bonds, sometimes automatically put them as majority and proactive shareholders. They have power to influence over management decision making, conduct regular engagements with management of companies, placing new shares, demand meetings with the senior managements of companies regards to their performance, vote on key issues at general meetings and communicate on other matters affecting shareholders' interest. The institutional investor which is an external party that are independence from the management can be seen...
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...Corporate governance heavily refers to the whole structure of rights, processes and controls established internally and externally over the management of a business entity with the objective of protecting the interests of its stakeholders from any type of loses incurring. To begin with, firstly there are three types of auditors in the corporate governances, internal, external and government auditors. The role of the internal auditors in the corporate governance is to evaluates corporate activities, controls or procedures and ensures that they are adequate and in compliance with senior management's recommendations and human resources guidelines. An internal audit also helps a firm adhere with regulatory standards and industry practices.An internal auditor evaluates a firm's processes, "controls" and mechanisms to ensure that they are "adequate" and "functional". A control is a group of instructions that top management puts into place to avoid losses due to human error, technology breakdowns or fraud. A "functional" control provides corrections to internal problems. A control is "adequate" when it clarifies instructions for job performance and problem reporting. An auditor also ensures that a firm's activities and controls abide by government mandates or industry regulations. (Codjia, 2013) Moreover the role and responsibility of an external auditor is to provide assurance to the general public regarding the truth and fairness of the information presented in the audited reports...
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...1. Auditors were unable to verify the aircrafts claimed to have been purchased by FCB in 2005. The audit team found around RM231m of non-functional rundown aircraft in hangar. This situation leads to potential fraud bcause those old aircrafts had high price tag.Thus, it will increase the holding cost or storage cost of the assets. Then, the auditor should conduct the common test procedure which includes the examination of vendors’ invoices and receiving reports. The auditor had to perform the physical examination of those assets in order to verify the existence of the assets with the records. It is a must for every purchase to have invoice or grant to verify the purchase. Besides that, for the purchase involving high value of asset, it must have approval from top level of company which is Board of Director. In case the aircraft is non-functional rundown, it must be disposed in order to eliminate the unnecessary expenses for the company. 2. There are increasing in debtors’ confirmation letters were returned. Reasons: those debtors had changed their mailing addresses. Perhaps the company had a phantom client. So, Mr. Chuah need to confirm the account receivable whether the address is updated or real address. Besides that, the company should be using positive confirmation letters. Besides, the service agreement should be reviewed & obtain the explanation from FCB. For control procedure, the auditor needs to review periodically the account receivable trial balance especially...
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...Teaching Notes HealthSouth Corporation: Fraud, Greed and Corporate Governance Case Summary During the 1990s, Richard M. Scrushy, the former CEO of HealthSouth Corporation, engineered many acquisitions of rehabilitation clinics, outpatient surgical care operators, nursing homes and other health care companies. Mr. Scrushy had been a respiratory therapist who spotted a niche in the health care market and utilized his entrepreneurial talents, marketing skills, and super salesmanship to set up and run what became the third largest publicly held company in Alabama. Eventually, HealthSouth became the largest provider of ambulatory surgery and rehabilitative health care services in the United States with 1,700 facilities and 51,000 employees. In 2003, the Securities and Exchange Commission (SEC) accused the company and Mr. Scrushy of inflating earnings to the tune of $1.4 billion since 1999. In November 2003, a federal grand jury indicted Mr. Scrushy on 85 counts including conspiracy, securities fraud, money laundering and charges related to overstating HealthSouth’s earnings by nearly $3.0 billion. According to federal investigators, the company overstated earnings to meet analysts’ earning estimates, while hiding the accounting fraud from the auditors. However, questions were raised whether the auditors failed to find or simply overlooked the fraud at HealthSouth. Central to the investigation was the issue of what role Mr. Scrushy played in “cooking the books.” However, as the case...
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...journal is available at www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at www.emeraldinsight.com/0268-6902.htm The changing role of the auditors R. Jayalakshmy, A. Seetharaman and Tan Wei Khong Faculty of Management, Multimedia University, Cyber Jaya, Malaysia Abstract Purpose – To highlight the pressures that the auditors would face in the era of globalisation and the challenges they should be willing to accept in order to maintain trust and integrity. Design/methodology/approach – A wide range of articles and journals published in international journals as well as local journals has been reviewed. The areas covered include audit fraud, true and fair view interpretation, auditor independence and role of internal auditors. Further, ideas have also been obtained from critical write-ups in the business magazines on the fall of multinationals. Findings – A wide range of interpretation has been given by various groups of people on their understanding of the phrase “true and fair”. This has created great confusion as to the interpretation of the audit reports. This has been proven by the fall of many multinationals and the audit pioneers, Andersens. This is one of the causes of audit fraud and it is also seen that as the auditors face an enormous challenge as they enter the twenty-first century, they should be willing to change their attitudes towards their clients. Professionalism should be in the forefront, and an...
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...prison in the Satyam fraud case. The court also imposed a fine of Rs 5 crore on Ramalinga Raju, the Satyam Computer Services Ltd's founder and former chairman, and his brother B Rama Raju and Rs 20-25 lakh each on the remaining accused. HT presents a lowdown of the country's biggest-ever corporate accounting scandal . What is the Satyam scam about? It is about corporate governance and fraudulent auditing practices allegedly in connivance with auditors and chartered accountants. The company misrepresented its accounts both to its board, stock exchanges, regulators, investors and all other stakeholders. Is this an accounting fraud, a market manipulation/fraud or both? It is a fraud, which misled the market and other stakeholders by lying about the company’s financial health. Even basic facts such as revenues, operating profits, interest liabilities and cash balances were grossly inflated to show the company in good health. Who is to blame here? The promoters? The promoters are primary culprits, although it is almost impossible to misrepresent such facts without the connivance of the auditors and some executive board members. Independent directors, it seems, were kept in the dark about the actual books of accounts. What about the auditors? The role of external third party auditors, who were tasked to ensure that no financial bungling is undertaken to carry out promoters’ interest or hide facts, have also been brought to question. Anatomy of a fraud 1. Maintaining...
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...Flat Cargo Berhad Presented by: ABDUL RAHMAN BIN YAACOB AFIFAH BINTI HALIM MAZIAH BINTI MOKHTAR MOHAMMAD AZWAN BIN BASHIRUN MOHD ZUBAIR BIN NOR AZMAN AC088467 AC088398 AC088445 AC088323 AC086470 Presented to: SIR AZWAN ABD RASHID NABILAH BINTI SAAD AC088349 INTEGRATED CASE STUDY ACSB 413 INTRODUCTION Company Background 1997 Started operations with 2 aircraft - Boeing 737-200F - Cessna Grand Caravan Operating Primarily -Air cargo carrier Principal activities of FCB Subsidiaries -Air Freight Service and Aircraft Ground handling service 15 September 2001 -Obtained listing in Bursa Malaysia Auditor -Kenyans & Associates In 2001 to 2004 -the have a fast growing at intra- Asian air express market -demand for express transportation Services increased. -give best delivering quality services and satisfying customer demand. FCB Wholly Owned Subsidiaries Cargo management Sdn Bhd Fc Spare Sdn Bhd FCB Wholly Owned Subsidiaries FC Air Ltd FCB (SPV) Ltd Cargo Air Service Sdn Bhd FCB secured agreements with well-established companies Up to 2005 Bax Global United Parcel Service (UPS) Express Worldwide Nippon Express CityLink Nationwide Express Top Management Team Dato’ Ibrahim Samad • Chairman • Independent non-executive director • Former of Directors General for Ministry of Transportation • As a Malaysia chamber of commerce’s former president Mr Lim Loon Sim • Chief Executive Officer (CEO) • Founder for FCB • Board...
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...PROBLEM 5 LITERATURE REVIEW 6 a. Introduction 6 b. The Need for an Audit 7 c. Risk of fraud 8 d. The Auditor-Investor ''Expectation Gap'' 9 e. Auditing Profession and Challenges 9 f. Public opinion 10 g. Family or Personal Relationship 10 h. Integrity 11 i. Inherent limitations of an audit. 11 j. Responsibility of Auditors to Third Parties – Case Law 12 k. International, Assurance Auditing, Standards Board (IAASB) 14 CORPORATE FRAUD CASES 16 CASE STUDY: 21 CONCLUSIONS………………………………………………………………………………24 REFERENCES……………………………………………………………………………..….25 SUMMARY OF TERMS ISA: International standards of Audit KPC: Kenya Pipeline Company IAASB: International Assurance Audit Board IFAC: International Federation of Accounting USD: United States Dollar KCB: Kenya Commercial Bank BCCI: Bank of Credit International SEC: Securities and Exchange Commission ABSTRACT The way in which auditors perform their duties and the auditing profession in general raises questions and puts the auditors on the spotlight from clients who rely on their reports. Questions on whether the public trust the way auditors perform their secondary duty of detecting errors and frauds, the reliability, completeness and accuracy of their auditing reports have been raised. The research focuses on; Management and auditors’ responsibility for its prevention and detection of fraud, the auditor’s responsibility for reporting fraud to management. The primary responsibility for prevention and detection of errors...
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...Recommendation Brief for an Internal Auditor Candace L. Beard ACC 544 May 23, 2011 Joseph Poletti Recommendation Brief for an Internal Auditor Internal auditing helps companies to look at ways of improving and achieving short-term and long-term objectives. Internal auditors are hired to perform internal audits that look at a company’s operations, investigating fraud, financial reporting, safeguarding assets, and compliance of the laws and regulations set for companies. The internal auditors are employed to improve a company’s internal controls. Effective working internal controls detect and prevent fraud that is tested by internal auditors. Benefits of Internal Auditor Understanding the benefits of an internal auditor will help in the decision of hiring an internal accountant. Internal auditors verify the effectiveness of their organization's internal controls and check for mismanagement, waste, or fraud. They examine and evaluate their firms' financial and information systems, management procedures, and internal controls to ensure that records are accurate and controls are adequate. They also review company operations, evaluating their efficiency, effectiveness, and compliance with corporate policies and government regulations (Bureau of Labor Statistics). As an internal auditor he or she will be able to look for any mistakes and address them in the reports. Finding a professional to fill the role of an internal auditor benefits the structure of a growing business...
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...Integrated case studies (Acc 4291) Case report 1 flat cargo berhad: An auditor’s conundrum Case Synopsis The case is related to one company known as Flat Cargo Berhad (FCB). FCB was one of the largest air freight companies in Malaysia which servicing several government linked companies including Freight Malaysia Berhad. FCB is a listed company and was registered as an investment holding company with several subsidiaries. Among its subsidiaries are FC Spare Sdn Bhd, Cargo Management Sdn Bhd, FCB (SPV) Ltd, Cargo Air Services Sdn Bhd and FC Air Ltd. FCB started its operations in 1997 with two aircrafts: a Boeing 737-200F and a Cessna Grand Caravan. FCB’s major shareholder in 1997 had been Bangor Berhad, which was part of a diversified international family owned conglomerate, the Miri Group. Up to 2005, FCB secured agreements with well-established companies such as Worldwide Express, United Parcel Services (UPS), Nationwide Express, Citylink, Bax Global and Nippon Express. The Chairman of FCB was Dato’ Ibrahim Samad who was also an independent non-executive director of the company. The top management team comprised of Mr Lim Loon Sim as Chief Executive Officer, Mr Ali bin Ahmad as the Executive Director and Mr Kim Boon Chok as the Chief Financial Officer. In 2005, FCB’s counter was ranked 4th in terms of capital gains and dividends to shareholders. Its share price at 31 December 2001 had been RM 1.89, but by end of 2005, the share price surged to RM10.60 per share...
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...Corporate Ownership & Control / Volume 2, Issue 2, Winter 2005 РАЗДЕЛ 3 УГОЛОК ПРАКТИКА SECTION 3 PRACTITIONER'S CORNER INVESTORS TRUST AFTER PARMALAT SCANDAL: THE ROLE OF CORPORATE GOVERNANCE Giovanni D’Orio Giovanni D’Orio, Department of Economics and Statistics, University of Calabria – Rende (CS) Italy. Contact: gio.dorio@unical.it 1.1. Introduction The collapse of the Parmalat food empire reveals a troubling aspect about Italian capitalism - the lack of effective financial control over its family-owned companies. But was Parmalat scandal a pure problem of corporate governance or was it simply a “fraud”? Bearle and Means (1932 pg. 6) famously explained: “The separation of ownership from control produces a condition where the interests of owner and of ultimate manager may, and often do, diverge ....”. Is this the case? Were the people who invested in bonds and shares of Parmalat savers, investors or what? Which was the role played in the story by Auditors, CONSOB and Bank of Italy? This paper analyse the current situation of the Italian corporate governance and saving system in a critical view trying to find an explanation to the previous questions. 1.2. Corporate Governance and the legislative decree 19/01/03nr. 6: the alternatives The Italian system of corporate governance does not fit in either of the categories of the well-known distinction between bank-based and stock exchange 102 based systems. Instead, it can be ranked among the ...
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...‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ UP708386 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) 708386 Corporate governance, Financial Crime, Ethics & Controls for Finance Pathways (U234479) ‘’Earnings management, in exchange listed companies, is not fraud but a case of caveat emptor for investors ‘’ This essay is intended to evaluate different views on a case whether the earnings management in exchange listed companies is consider as a fraud or caveat emptor for investors. One of the first mentions of earnings management has been given by Shipper where she described it as ‘’disclosure management, in the sense of purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.’’ (Shipper, 1989). In other words the managers are adjusting profits or losses on final accounts to mislead the stakeholders and to encourage them from investing. Earnings management become a problem for investors as it generates fake impression about companies success and misguide them into making wrong investment decisions which often leads to a making a loss. Another problem arises with incorrect financial reporting which is insincere for investors and resulting in making a capital market...
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...1 Satyam Scam in the Contemporary Corporate World: A Case Study in Indian Perspective Introduction Satyam Computer Services Ltd was founded in 1987 by B.Ramalinga Raju. The company offers information technology (IT) services spanning various sectors, and is listed on the New York Stock Exchange and Euronext.Satyam's network covers 67 countries across six continents. The company employs 40,000 IT professionals across development centers in India, the United States, the United Kingdom, the United Arab Emirates, Canada, Hungary, Singapore, Malaysia, China, Japan, Egypt and Australia. It serves over 654 global companies, 185 of which are Fortune 500 corporations. Satyam has strategic technology and marketing alliances with over 50 companies. Apart from Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi, Kolkata, Bhubaneswar, and Visakhapatnam. "The truth is as old as the hills" opined Mahatma Gandhi, christened the Father of the Nation by Indians. So a company named "Satyam" (Truth, in Sanskrit) inspired trust. The IT boom in India, was fuelled by young, middle-class, and educated, budding Indian entrepreneurs and Western firms anxious to outsource to take advantage of high-skill, low-wage worker. This trend created a new breed of businessmen for the 21st century and generated many fortunes literally overnight. The global corporate community was flabbergasted and scandalized when the Chairman of Satyam, Mr. Ramalinga Raju resigned...
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