You are required to research for two cases of corporate collapse and analyse how auditors had failed to fulfil their responsibility professionally.
Some of the accounts like an aging report, trial balance, debtors account, etc. should be analyzed by the management so that they can give attention on the statements which may have led to the closure of the Onetel. Because of the irregular behaviour and inattentiveness of the organization, it has been observed that this type of cases will be posing a major threat to the whole company. The value of fate and aggression in an organization is very necessary so that it can survive in the situations of the environment. Also, the company was observed to make changes in the decision policy that was in relation to the accounts of the intangible assets and the deferred expenditure policy of the company which was to be changed in every 2 years. The entire full management and the irregular policies and decisions have led the cost of the operations to increase thus making it hard for the form to sustain in the environment (Livne, 2015). Because of the manipulated decisions everywhere in the management of the company, there have been many optimum uses of the illegal methods by the auditor which have helped the company to make the fake report to represent its financial condition.
The main objective that was taken into consideration by the HIH Company was to expand the parameters so that it can create a base of the organization which can operate with the help of more funds than usual. According to the plan, the company was not able to fulfil the decisions and it faced a very high increase in the liability with respect to the assets which decrease the current ratio of the firm (Westfield, 2003). The matter became much worse for the company after the assessment of this plan. All other assessment of the data of the organization clearly stated that the growth of liability was negligible in front of the parametric growth rate of the organization which was not actually the reality of the environment. Also, there were no changes made by the organization so that a systematic method of management can be adopted (Mock et. al, 2013). Even after the less time that is given to the company in order to cater with the needs, it hasn’t made any additional changes your introduction in the programs that may help the company to cope with the problems.
There was a revaluation of many ethical issues that were observed while the assessment of the audit plan generated towards the HIH collapse. Also, these ethical issues were said to be the reason for the mismanagement of the organization. Ethics are the major principles and moral values that should be used by an organization to keep the environment of company clean. The changes in the ethical values of the organization may prove to change the situations thus leading to the confusion between auditors. It should be clearly stated that the auditor should try and work for the best interest of the companies and shareholder so proper and desert information can be obtained and further used for assessment of decisions. For the HIH limited or was observed that the major 5 ethical principles which were not kept in mind your integrity, objectivity, confidentiality, professional behaviour, and competence. Also, payment of dollar 5.1 million and 2.8 million was observed to be made for audit and non-audit fees by the organization.
The use operating cash deficits of the OneTel Limited customer billing and cash collection problems and employed large positive accruals and neoconservative accounting policies to minimize losses were observed. It was also seen that BDNP had never played any role in the assessment of these kinds of risks. Also, there have been many pieces of evidence found in relation to the Purchase of many types of non-audit services by the external auditor which was hired by the organization. The audit fees which were paid by the organization to the auditor was stated to be 41%, 54%, 52% and 46% for the years 1997, 1998, 1999 and 2000. If an organization is involved with NAS, then it should have much-evaluated client internal control information and the plan of the audit so that prosecution can be held in a particular and specific manner (Cook, 2001).
The evidence which was presented towards the malfunctioning of the Onetel Limited stated that the form was not running in a faithful manner by the use of its fundamental earning process. The quality of financial reporting that was presented by the organization was also low like the quality of earning. There are no concerns in which it can be stated that all red quality which was provided by the firm was having a nice quality (Parker et. al, 2011). Therefore, because of the low financial performance and bad quality of forgetting the concealment of one tells real financial performance was not being able to be provided to the shareholders. Also, this resulted in blockage of any of the opportunities that may arise as a business operation for the organization in future.
It should be clearly noticed that the type of audit services that have been provided by the organization to its shareholders is fully unethical in nature because of the unidentified and attentive information that may mislead the shareholders. Because of the unethical nature which was seen by the organization, it is very hard for the shareholders to invest in its share. It was also observed that the increase in the audit we have reduced the work performance of the organization which has depicted of year relationship that we have prevailed between the management and the auditor. Does after the assessment of all the factors it has been clear that all the financial statements for highly fabricated and influenced by the management of the firm. Therefore it can be concluded that the integrity of the auditor was under immense pressure which has made it create such financial documents.
It is very important for the corporate governance of the firm to use the principle of full disclosure for the proper functioning of its board. Therefore the lack of evidence of the one tells case for the monitoring of the management may have been the contribution towards the collocation of the organization. It has also been observed that the management has never asked for such kind of information (Geoffrey et. al 2016). There are also several occasions in which it was observed that the scrutiny of Onetel management was not being critically done by the nonexecutive directors. It has also been clearly stated in some statements that there was no interaction between the bird and the management so that a proper decision-making process can be taken into account.
It was clearly noticed after the assessment of all the information provided in the report that the auditors were informed about the mishappenings of the financial position of the company and was unable to provide a true and fair data are based on it. The auditors also knew the aggressive accounting approach that was being used by the management of the organization. There were many inadequate future claims of liability and different decisions that may have been the result of the collapse of the organization (Cappelleto, 2010). Therefore if the responsibility of the auditor would have been carried out by him in a proper manner, then there may have been no such disastrous environment present in the organization (Geoffrey et. al 2016). The Independence that has been provided to the auditor of the firm has also been one of the great considerations. There was it should be completely known that the auditor should always compile to the auditing standards and then make the financial statements of the company so that there may not be any chances of failure (English et. al, 2010).
It was observed that the Onetel Limited was audited by the same type of audit from the year 1997 to 2000. In this year’s all the decisions that were being taken by the auditor for the organization were unqualified (Monem, 2009). More than 48 objections were identified in the reports of the one tell Limited by the analysis conducted by The Institute of Chartered Accountants of Australia. The details that are in charge of the analysis of the financial statements of the organizations were criticized for their work by the ICAA. Also, a fine of dollar 48000 was to be paid by BDNP. Also, the analysis which was made by ICAA for the financial statements of the organization stated that they were not made in accordance to the corporation’s laws, and the Australian accounting and auditing standards were also not taken into consideration. It was observed in the year January 2001 that the organization has changed its auditor and the new auditor Ernst and Young as suggested that the provision of bad debts that have been created by the organization has been too low (Monem, 2009).
The auditor will be penalized for all the actions with the laws stated in the acts. All the small situations summed up to become a very big decision which led to the liquidation of the company and the cost to compile towards it. The inexistent moral code were rolled back and new codes such ASA 701 came to the forefront where the auditor need to provide relevant disclosure of the issues that are present in the company.
This case study different new methods and associations that may be present in the corporate governance structure of a form and may lead to the collapse of the organization. All other factors remaining constant if the form is having a very weak corporate governance structure than others, then it is set to collapse more likely. Therefore the high demand for good corporate governance structures helps to maintain the integrity of the poor firm’s performance. It has also been clearly stated that the corporate governance strategies that are considered by the organization act as “safety net”
Conclusion
Overall, it can be commented that the most critical area of a company is that of the audit. Hence, any differences in this area would lead to governance issue and downfall of the company. HIH and OneTel failed miserably owing to the acts of auditor. Therefore, it is imperative that the regulatory bodies must re align the functioning of the auditor and the board should increase the power so that the companies have better governance. Following the collapse of HIH and OneTel it can be recommended that the accounting standards needs to be strict in terms of implementation so that the loopholes are not pointed. The past attempts of the financial accounting standards have failed to create an impact. Going by the overall study it is advisable that the detailed rules must be present in the organization and that the auditor rotation concept must be present in the organization. This will help the organization to prevent the auditor from creating any familiarity with the organization or the client.
References
Cappelleto, G. (2010) Challenges Facing Accounting Education in Australia, AFAANZ,
Cook, T. (2001) Collapse of Australia’s fourth largest telco adds to growing list of corporate Available from: https://www.wsws.org/en/articles/2001/06/onte-j08.html [Accessed 24 May 2018]
English, L., Guthrie, J., Broadbent, J. and Laughlin, R. (2010) Performance audit of the operational stage of long term partnerships for the private sector provision of public services. Australian Accounting Review. [online]. 20(1), pp. 64-75. DOI: 10.1111/j.1835-2561.2010.00075.x
Geoffrey D. B., Joleen K., K. K.S., and David A. W. (2016). Attracting Applicants for In-House and Outsourced Internal Audit Positions: Views from External Auditors. Accounting Horizons. [online]. 30(1), p.143-156. DOI: https://doi.org/10.2308/acch-51309
Livne, G. (2015) Threats to Auditor Independence and Possible Remedies [online]. Available from: https://www.financepractitioner.com/auditing-best-practice/threats-to-auditor-independence-and-possible-remedies?full [Accessed 24 May 2018]
Mock, T. J., Bedard, J., Coram, P., Davis, S., Espahbodi, R. and Warne, R. (2013) The audit reporting model: Current research synthesis and implications. Auditing: A Journal of Practice and Theory. [online]. 32, pp. 323-351. DOI: https://doi.org/10.2308/ajpt-50294
Monem, R. (2009) The Life and Death of OneTel. Griffith University.
Parker, L., Guthrie, J. and Linacre, S. (2011) The relationship between academic accounting research and professional practice. Accounting, Auditing & Accountability Journal. [online]. 24(1), pp. 5-14. https://media.accountingeducation.com/1304/Parkeraaaj24(1).pdf
Westfield, M. (2003) HIH : The Inside Story Of Australia’s Biggest Corporate Collapse [online]. Available at: https://www.smh.com.au/articles/2003/03/14/1047583693489.html [Accessed 26 May 2018]
Wood, D A. (2011) The Effect of Using the Internal Audit Function as a Management Training Ground on the External Auditor’s Reliance Decision. The Accounting Review. [online]. 86(6), pp. 34-56. DOI: https://doi.org/10.2308/accr-1013
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