live soft skills

soft skills Limitations of internal control systems Even if Control Systems are assessed as very strong, auditors will still do SOME substantive testing. Controls are never completely reliable because: ● staff make mistakes ● staff collude to override systems ● staff believe the cost of the control is greater than the benefit ... so refuse to do it ● controls are designed for normal events ... unique / new types of transaction may bypass the system

soft skills WHAT IS AN INTERNAL CONTROL SYSTEM? According to the Turnbull guidance in the UK Combined Code, control systems need to: ● Safeguard company assets ● Maintain the efficient running of the business ● Protect the accuracy of financial reporting information ● Protect the company from breaking laws and regulations There are several ways in which control can be achieved in an organisation: ● The use of contracts (e.g. with employees) to clarify roles and responsibilities ● A system of reward and discipline ● Feedback and feedforward ● A clear organisational and command structure It is generally accepted that a good Internal Control System is made up of 5 elements: ● A strong Control Environment ● Good Control Procedures ● Good Risk Assessment ● Good Information Systems ● Effective Monitoring (typically the role of internal auditors ) Control environment The control procedures are unlikely to be effective unless there is a strong control environment: ● Management Att...

soft skills In family companies, it is often the case that: ● family members have special voting rights ● family members have guaranteed seats on the board. This can lead to both positive and negative governance issues. Positive ● with the family name at stake, there is likely to be a greater feeling of "ownership" on the Board, which may reduce the risk of unethical behaviour ● to continue the family name, a longer term view of management may occur. Negative ● a less independent board ● the board may have a dominant person / group of family members ● with board members often coming from a single family, there may be a lack of variety in ideas, and an unwillingness to change previous decisions ● family problems may become business problems ● there may be unsuitable people on the board, who were elected purely because of their membership of the family. DOMINATED COMPANIES

What is professional behaviour? In its simplest terms, professional behaviour is behaving in a manner that is prescribed, and expected, by your profession. In a wider sense, professional behaviour would involve: o Following the rules and standards mentioned above o Ensuring your work was always of the best quality o Not doing anything to damage the reputation of the profession o Actively trying to improve the reputation of the profession o Acting in the "public interest" at all times. The public interest On many occasions in your studies, you meet the concept of "public interest". For example, auditors are usually expected to keep client information As noted in confidential ; but one exception to this rule is where disclosing the information would be in the public interest. chapter 8 , this is a very difficult concept. For example: o How many of the public should we consider? o How many can we consider? o As a result of such difficulties, the professional account...

SARBANES-OXLEY ACT (SARBOX, SOX) After the collapse of Enron, WorldCom, and a series of other American corporate frauds and failures, the US Government was keen to act quickly and firmly. On 30 July 2002, the Sarbanes-Oxley Act was passed (it is named after the 2 US politicians who sponsored it through Congress). It was not long before it became known as Sarbox … or SOX. There are many differences between SOX and the UK Combined Code: ● SOX is law, with strict penalties for non-compliance. The Combined Code is Best Practice, not law ● SOX makes audit partner rotation the law, whereas in the UK such matters are covered by the profession’s Codes of Ethics ● SOX has a ban on auditors providing a range of "other services" to their audit clients. In the UK, very few "other services" are banned, but are instead considered within the objectivity area of Ethics. ● SOX requires the CEO and CFO to personally attest to the accuracy of the Annual Report, Quarterly Reports...

A clash of responsibilities? As a However, accountants also have responsibilities to others, such as family, religious groups etc. Of particular interest are a professional’s responsibilities to As an employee, you have contractual (and ethical) responsibilities: professional , an accountant has responsibilities as described earlier in the chapter. employers . o To abide by your contract o To follow the rules of your workplace o To do as your employer says o To show a duty / loyalty to your employer and act in the organisation’s best interests (e.g. by acting in the best interests of the organisation’s shareholders and other stakeholders) o To carry out work honestly and not allow personal interests or pressures to outweigh employer interests o Clearly, if your employer expects you to behave in one way, but your profession expects you to do something else, then you face a conflict. Possible solutions to this conflict could be: To keep employer information confidential. o Allowing l...

What is professional behaviour? In its simplest terms, professional behaviour is behaving in a manner that is prescribed, and expected, by your profession. In a wider sense, professional behaviour would involve: o Following the rules and standards mentioned above o Ensuring your work was always of the best quality o Not doing anything to damage the reputation of the profession o Actively trying to improve the reputation of the profession o Acting in the "public interest" at all times. The public interest On many occasions in your studies, you meet the concept of "public interest". For example, auditors are usually expected to keep client information As noted in confidential ; but one exception to this rule is where disclosing the information would be in the public interest. chapter 8 , this is a very difficult concept. For example: o How many of the public should we consider? o How many can we consider? o As a result of such difficulties, the professional accoun...