Verified Document

Auditing Leslie Fay Case Essay

Leslie Fay Company Case Leslie Fay discovered in 1992 that the company's corporate controller with some other employees had committed a serious auditing fraud which showed inflated profits. When these irregularities were found, the company had already been knee-deep in debt as there were losses of around $81 million dollars. This led to the company filing bankruptcy to protect itself against creditors. This was indeed a serious issue and one may wonder if SOX, had it been designed then, would have been able to discover the irregularities much sooner.

Theoretically speaking, it appears that the answer would be in the affirmative. A company which is closely following SOX's mandatory auditing practices of having an internal control system and independent auditors checking the presence of those controls would be in a much better position than Leslie Fay because irregularities could be unearthed sooner. With internal controls such as random checking of transaction and running them...

Parts of this document are hidden

View Full Document
svg-one

It was found that none of the entries on the cost side were accurate and all had been doctored to show profits. Similarly with third party auditing, it would have been much easier to capture irregularities.
Having said that, we must not forget that this is all in theory and how SOX fares in practice can only be seen after implementation of the law. The reason we say this is because every company has a different culture and a different way of conducting business which in some cases may actually affect serious implementation of SOX. Secondly unethical behavior can occur at all levels and it's possible to assume that some people would still betray the many layers of auditing protection provided by SOX to doctor financial statements. Hence it is highly debatable if accounting irregularities could be found sooner with SOX.

Answer…

Cite this Document:
Copy Bibliography Citation

Related Documents

Auditing the Role of Databases
Words: 5292 Length: 16 Document Type: Essay

In other words, if the financial difficulties they encounter are the fault of the auditing firm, they will have protection from any legal ramifications they may have encountered from faulty accounting or auditing measures. Preventive measures are also part of the internal controls of the auditing firm itself, so that each person who works with that firm knows the measures that are to be taken to make sure auditing

Audit Quality and Agency Cost
Words: 4858 Length: 15 Document Type: Research Paper

Audit Quality and Agency Cost Since the advent of industrialization, there has been the presence of a bond between the people who invest and the people who manage those investments, forming a vital relationship amongst the two groups. Although with the rise of such relationships, the soaring issues of trust and confidence have been a hindrance in economic growth. Viewing the high percentage of the capital of investors or shareholders in

Audit Planning Is the First Step in
Words: 1333 Length: 5 Document Type: Research Paper

Audit planning is the first step in establishing the basis of the nature, timing, and extent of the overall audit strategy to determine the validity of the financial statements. An efficient and effective audit plan provides for a thoroughly and properly planned audit (The Importance of Audit Planning). It helps to reduce audit risk to a low level. Audit planning ensures appropriate attention to critical areas and that potential problems

Audit Plan Outline Over the
Words: 913 Length: 3 Document Type: Term Paper

The most notable include: The inability to account for risks from customers with poor credit. The way sales are recorded with the income booked once the transaction is closed (versus when the income is received). Preparing for sudden shifts in the economy or from competitors. Substantive Tests The substantive test is when we are determining if the current strategy will be effective in addressing the risks facing the firm. This is accomplished through examining

Auditing in the Public Sector
Words: 2594 Length: 8 Document Type: Term Paper

Auditing function has undergone several transformations from the periods when it was simply a function of giving opinion but also to an error where auditors are looked upon to offer advisory roles. The auditors should therefore advice the government on the impacts of their operations on the public and on other improvements that can be made to maximize on the service delivery. In pursuing their taxation policies and fiscal

Auditing Standards Standard: SAS No.
Words: 592 Length: 2 Document Type: Term Paper

The implementation of this standard will give auditors much more control over the audit process. This gives the auditors the tools they need to meet their responsibilities with respect to professional skepticism. Auditors are responsible for the quality of the financial statements, and this standard gives them the mandate to be sufficiently creative in the audit design so as to detect misstatement. The change benefits experienced auditors in particular, and

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now