Auditors and Regulatory Oversight (Essay Sample)

Auditors and Regulatory Oversight Student’s Name Course name and number Instructor’s name Date submitted Introduction In the recent months we experienced an accounting scandal that took place in the diamond foods that is a snack Company. It was a shock to many shareholders and some of the Walnut farmers who stay in California but it was something that the accounting experts were already raising the red flag. On February this year, there was an investigation on the diamond Company and the audit committee was able to find payments of approximately $20million to the walnut growers that took place in the year 2010 and approximately $60million in September 2011 and the payments were not indicated in the right period. Legal liability to the third party When we have delays in the process of booking payments from one year to the other, it tends to reduce artificially the cost of the Company, and it will eventually boost the earning during that period. The legal liability to the third party is that because they have grounds that the firm was lying about its financial potential, they have the right to sew the Company. The third party was relying on the financial information of the Company since the federal and the common law had made it clear what is expected of a company trading in the US FOREX. The third party was investing in the Company because they were aware of the financial position of the Company through the judgment of the CPAs. Any form of the misleading report could affect the judgment of the clients who are interested in investing in the firm. Violation of the audit statement The auditing statement that the Company violated was that the auditor has the obligation of exercising due professional care when carrying out the audit performance and report preparation. The Company did not follow this statement as the report of the Company was providing false information concerning the financial status of the Company. The Company had the obligation of providing accurate and correct information to the public to consume. Any false information that the Company provides to the consumers leads to wrong decision making (Nicolăescu, 2013). We can clearly see that we had the lack of professional care when the auditors and the financial managers were performing the audition and the preparation of the report. The financial report of the Company should at all times be clear and truthful to attract genuine interests from people (Gunny et al., 2013). Basing the financial report o lies is risky, and it will eventually backfire and affect the financial situation of the Company shortly. Auditors and managers responsibility The responsibility of the auditor is to try and plan so that they can be able to obtain an assurance concerning the figures in the financial statement and if it has any misstatement that could have been caused by fraud or error. The financial statements are now the responsibility of the management. The auditor can only express an opinion concerning the financial statement. The management then has that obligation of creating and adopting sound accounting policies. The management can also try to establish internal control that will help in the process of initiating, processing and recording transactions that are going to be content with the assertions of the management concerning the financial statements. In my opinion, I tend to believe that the responsibility of financial report is the responsibility of all the people working for the Company. In this case I tend to believe that the auditors together with the financial managers had a role to play in the misinformation that the Company was giving to the public to consume. The auditor had the responsibility of blowing the whistle whenever they discovered that something was not right in the financial statements of the firm, but they decide to keep quite. Keeping quiet meant they were collaborating with the fraud that was taking place. The financial managers also had that responsibility of reporting or raising the alarm when they discovered that something was wrong. It was not right for the managers to provide wrong information to the public as it was affecting their decision in the FOREX market. It is, therefore, important ...