In recent times, there have been accounting scandals that have stunned the finance and accounting realm, and thereby reemphasized the significance of maintaining proper accounting practices. The recent accounting scandal of Olympus Corporation, a Japanese manufacturing company for cameras and endoscopes is selected for this study. The company's scandal encompassed a 13-year period of accounting irregularities totaling almost $1.7 billion (Infinit Accounting, 2014).Audit Report Issued by CPA Firm
When Michael C. Woodford was appointed as president and Chief Executive Officer (CEO) of Olympus Corporation, he endeavored to make certain that the financial statements of the company were accurate and reliable. It is at this time that he discovered doubtful transactions in the statements of financial position of the company, with respect to the expenses reported. He instantly started inquisitions regarding these transactions, particularly about the inflated M&A advisory payments. Woodford was sacked by Olympus two weeks later upon deliberating with the management in an effort to remedy the inconsistencies with the books. He thereafter made the decision to report to the British authorities as a whistleblower (Elam et al., 2014). numerous accounting and financial irregularities were uncovered in the financial statements of the company after review, which contained false statements reported by the executives. However, regardless of the apprehensions on...
Through the tobashi scheme, Olympus Imaging Executives were able to hide approximately $1.7 billion in losses (Elam et al., 2014).
Statement of GAAS Violated by Company
In delineation, generally accepted auditing standards (GAAS) are the group of systematic guidelines used by auditors when undertaking audits of the finances of firms, making certain that the actions and reports of the auditor are accurate, consistent, and verifiable. In general, GAAS encompasses three components that have to be employed in the course of every audit. These elements include general standards, standards of fieldwork, and standards of reporting. For each of the three standards, there are a set of rules that must be complied with in the course of every audit. The statement violated is within the standards of fieldwork (AICPA, 2016). Most possibly, Olympus Corporation violated the regulation that the "auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures" (AICPA, 2016).
Comparison of Responsibilities for Management and Auditor for Financial Reporting
The responsibility of a company's management with respect to…
