live soft skills

soft skills Ethics is concerned with behaviour, and trying to ensure that auditors do "the right thing" [. FUNDAMENTAL ETHICAL PRINCIPLES ] .. whatever that is! As such, it is a difficult area to have rules , as it would usually be possible to imagine a situation where the rules would lead to the wrong answer. Typically therefore, ethics is about guidance , relying on the professionalism of auditors to apply this guidance in an appropriate manner when faced with difficult situations. Guidance is contained in the ACCA Code of Conduct ... but if every Institute had its own ethical code, there would be several codes in the UK alone, and hundreds around the World! An International Code of Ethics has been developed by IFAC, in the hope of providing countries with a starting point for developing their own Codes – and to try to create some consistency in guidance around the World. In the UK, the Auditing Practices Board has created a series of Ethical Standards based on the IFAC Cod...

soft skills Just as there are accounting standards, there are also audit standards to give auditors guidance (and in some cases rules) as to how they should perform their audit work. Many countries have their own national audit standards – e.g. In the UK, the Auditing Practices Board set them. There are also International Standards on Auditing (ISAs), which are set by the International Audit & Assurance Standards Board (IAASB), part of the International Federation of Accountants (IFAC). For countries without their own audit standards, the ISAs provide a set of standards that can be adopted, or altered based on national requirements. Quality control is partly achieved by having audit standards to follow ... however it is also achieved by the RSBs (e.g. ACCA) checking the audit work of their members, and handling complaints. The RSBs also have rules to ensure their members are keeping up to date with technical changes. AUDITING STANDARDS AND QUALITY CONTROL

soft skills APPOINTMENT OF EXTERNAL AUDITORS { IPOINTMENT OF EXTERNAL AUDITORS,leaves... Audit Committee,RESIGN REMOVE }n most countries, the auditors are reporting to the shareholders, so are appointed by the shareholders. The Board of Directors will propose a Firm and this will then be voted on by the shareholders. Usually, they are appointed on an annual basis at the AGM. If auditors are needed mid-year (e.g. because the previous Firm resigned) then it is often possible for the Board of Directors to appoint a Firm up till the next AGM. In most large companies, there will be a specialist Board Committee that will recommend a Firm to the main Board – this committee is called the Audit Committee . When the external auditor leaves... Sometimes it is necessary for the auditors to RESIGN . If an auditor resigns, they may wish to speak to the shareholders to explain their reasons. Therefore, the law allows them to require the company to call a General Meeting (GM), or to require the compa...

soft skills Polly Peck, Maxwell, Barings The 20 th century <Polly Peck, Maxwell, Barings > In 1932, two economists Bearle and Means made some observations about American companies: ● Shareholders were more likely to sell their shares than speak out if they thought directors were not running the company very well. This could result in poor quality management never losing their jobs. ● Some American companies were getting very By the 1950s, companies were growing ever larger – what we now know as " The 1970s – 1990s saw problems starting to become common. By the late 1980s, there were some famous corporate collapses – some due to poor management, but many due to fraud: large , and with so many shareholders there was a growing gap between those who owned the companies, and those who controlled them. globalization " … the existence of large multinational companies with influence around the world was well under way. Polly Peck ● Rapid growth in the 1980s took this East...

The South Seas Bubble by soft skils ● In the early Eighteenth Century, the South Seas Company was granted exclusive trading rights in the South Seas (South American colonies) in return for helping to finance Government borrowing. ● To help grow their operations, they looked for investors and issued shares. ● Things seemed to be going well – more and more investors put money in. ● There were expensive London offices – it all looked very successful. ● Management lied about how good it was – with no information available other than what management told them, investors did not know the truth. ● In 1718, Britain and Spain went to war … and the ability to trade in the South Seas was now zero. ● But investors did not know this and kept buying shares ….. ● …..whilst management secretly sold their own shares. ● Once the truth got out, there was a crash – the " South Seas Bubble " had burst. What can we learn from this? ● Investors need to be able to trust managers / directors...

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...