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• eBook-Kapitel aus dem Buch Accounting Fraud

  Case 44: Satyam Computer Services (India, 2009)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in Asian Companies 250 Case 44: Satyam Computer Services (India, 2009) Before he fell from grace, Ramalinga Raju was hailed… …based). But in January 2009, Raju had to ad- mit to the largest corporate fraud in Indian history. In a letter to Satyam’s board of directors, he… …scan- dal was quickly labelled as “India’s Enron”. “This is the saddest say for investors,” said one market analyst. “The fraud has badly shaken their… …Accounting Fraud in Asian Companies 251 stand by the company in the hour of crisis. “I am now prepared to subject myself to the laws of the land and… …face consequences thereof.” News of the fraud sent jitters through the Indian stock market. Shares in Satyam fell more than 70%, and the “Sensex”… …capital of Bombay expressed bafflement at how the fraud was not exposed earlier. Whereas Enron and other accounting frauds relied on dizzying arrays of… …off-balance-sheet partnerships and complicated circular trades with willing outside institutions to deceive investors, the Satyam fraud seemed to be absurdly simple… …earnings. Accounting Fraud in Asian Companies 252 However, there is usually little documentation associated with the number, so it is easy to… …was always only a fraction of what the company had es- timated before. Such data hinted that Satyam’s management might have been manipulating the… …letter to say that Sat- yam’s directors and senior executives had no knowledge of the fraud. But if there is a final lesson to be learned of accounting…

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• eBook-Kapitel aus dem Buch Accounting Fraud

  Fraud Theories

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …effective risk management policies) is decisive for any fraud prevention program. Moreover, opportunity often represents the only element an organization… …bosses and will say: “Management is dis- honest, so I can be dishonest, too.” Fraud Case Analysis: Lessons Learned 282 – The “Low-Hanging… …Fraud Case Analysis: Lessons Learned 276 3.3 Fraud Theories 3.3.1 The Fraud Triangle Although it is common knowledge today that people… …may commit fraud, it is often not understood why they do it. Donald R. Cressey, one of the pioneers in fraud re- search, came to the conclusion that… …fraud is most likely to occur when three critical elements come together: incentive/pressure, opportunity, and attitude/rationaliz- ation. In the case of… …accounting fraud, for example, the incentive/pressure might be the need to make earnings look better in order to meet debt covenants. The oppor- tunity might… …financial hump”. Cressey developed a three-pronged framework, commonly known as the fraud triangle, which is a very useful tool for fraud-fighters seeking to… …under- stand and manage fraud risks. The fraud triangle is shown in Exhibit 6 (see, e.g., Montgomery/Beasley/Menelaides/Palmrose 2002, p. 63; Wells 2007… …, p. 7). Fraud Opportunity Attitude/Rationalization � Financial stability or profitability threatened by economic, industry or entity operating… …conditions � Excessive pressure for management to meet the requirements or expectations of third parties � Management‘s personal financial situation…

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• eBook-Kapitel aus dem Buch Accounting Fraud

  Chapter 4: Conclusion and Outlook

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …guidelines for “best practice” in fraud risk management. For a summary of basic anti-fraud strategies, see Exhibit 9 (the definitions are extracted from… …and hiring and promotion standards. – A comprehensive fraud risk assessment helps senior management to under- stand their fraud risks, identify gaps… …elements of any integ- rity management approach. Integrity management does not only prevent major fraud risks and save significant costs. In the long run… …Exit Plan?), www.theconglomerate.org, January 2010 KPMG: Fraud Risk Management: Developing a Strategy for Prevention, Detection, and Response… …to frequent events, and that there is no scandal arising from infrequent but morally acceptable events. The cases of accounting fraud described in… …led away in handcuffs under indictment for fraud was shocking indeed, and society was outraged at the criminal acts. Most of the scandals occurred… …characterized the scenario in Europe and in Asia, showing that probably no corporate governance system in the world is able to prevent accounting fraud… …. Unfortunately, fraud will continue to hit the headlines of newspapers as well as the bottom lines of companies. Despite the best efforts of those who are respon-… …sible for fighting fraud, one inevitable reality remains: “fraud happens”. It is a given that economic crime will always be with us. Eliminating fraud is… …probability, the malfeasance is detected. Other factors contributing to accounting fraud may include unrealistic performance standards that fail to take into…

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• eBook-Kapitel aus dem Buch Accounting Fraud

  A Practice Aid for Company Executives: The Ethics Barometer

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …management team have a clear picture of the ethi- cal issues occurring at all levels of the organization. But to develop a sophisticated understanding of an… …agree, 2 = disagree, 1 = strongly disagree). A. Leadership/“Tone at the Top” A.1 In my opinion, the management team sets a good example in… …management team communicates the importance of ethics and integ- rity clearly, convincingly and consistently. The CEO and the other senior executives set the… …. A.12 It is easy for me to comply with the company’s standards of conduct because there is a strong level of commitment from top management and… …: everyone treats one another with respect; there is a relationship of trust between management and employees. B.6 In my immediate working environment… …violation of the company’s standards of conduct to local management, I believe my report would be handled confidentially and I would be protected from… …of em- ployees through speeches from senior management, internal newsletters, in-house magazines and training sessions. C.15 The company’s… …organizations etc.). C.16 All employees have attended fraud awareness trainings. Appendix: Practice Aids 294 C.17 The average duration of those… …fraud awareness sessions is adequate. C.18 The company has established its compliance policy by means of a long- term integrated plan. It regularly… …: Practice Aids 295 The management team can use the results of the ethics barometer to develop a com- prehensive integrity profile for the organization…

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  A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …to mitigate fraud risks or help to prevent and detect fraud? If so, what are these programs and controls? How does management monitor these programs… …report to? – Has management reported to the audit committee on the process for identify- ing and responding to the risk of fraud? Has management reported… …to the risks of fraud? – Does the audit committee oversee management’s monitoring of operating locations? – Has management reported to the audit… …committee on the company’s internal control? Has management discussed any specific concerns about fraud or significant control weaknesses with you? What… …procedures has internal audit performed to detect fraud? What specific procedures has internal audit performed to address the risk of management override of… …management is often in the best position to perpetrate fraud. Therefore, he has to use professional judgment in deciding whether it is necessary to… …Appendix: Practice Aids 297 Appendix II A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide Of… …course, some cases of accounting fraud described in this book were so complex and well-concealed that no auditor would have been able to uncover them… …. These cases were well beyond the scope of a traditional audit. Nevertheless, auditors have to be more aggressive in order to detect fraud. They have to… …team have to be motivated to think about how and where fraud might occur. They have to conduct the audit with a mindset that recognizes the possibility…

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• eBook-Kapitel aus dem Buch Global Management Challenges for Internal Auditors

  International Professional Practices Framework – Overview of the current guidance of the Institute of Internal Auditors

  T. Flemming Ruud, Philipp Friebe, Daniela Schmitz, Shqiponja Isufi

  …different legislative and regulatory initiatives aimed at improving the Governance, Risk Management and Internal Control of an organization. The PPF has… …systematic, disciplined approach to evaluate and improve the effectiveness of Risk Management, Control, and Governance processes. Figure 2: Definition of… …perform audit engagements. In order to effectively help the board and the management, it is necessary that the Internal Auditors behave in a professional… …example, the Position Paper "The Role of Internal Auditing in Enterprise-Wide Risk Management" describes the role of Internal Audit within the scope of… …scope of the Internal Audit includes the systematic evaluation of the adequacy and the effectiveness of the Governance, Risk Management and Internal… …(previously Risk Man- agement). Standard 2120 relates to Risk Management (previously Internal Control), while Standard 2130 describes the tasks of Internal… …Technology Controls Controls that support business management and governance as well as provide general and technical controls over information technology… …Code of Ethics and the Standards with the senior management and the board. Standard 1111 demands that the Chief Audit Executive communi- cates and… …the strate- gies and objectives of the organization. According to Standard 2120.A2, when evaluating the Risk Management processes the Internal Audit… …activity must take into account the potential for the occurrence of fraud and how the organization manages fraud risks. Furthermore, Standard 2120.C3 now…

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• eBook-Kapitel aus dem Buch Global Management Challenges for Internal Auditors

  Contribution by Internal Audit to IT Compliance

  Thomas Lohre

  …Corporate governance, risk management, compliance. All of these are concepts that can no longer be imagined away from the current business vocabulary and… …a concept originating from Anglo-American vocabulary32 and has, since then, been used for the debate regarding proper business management… …national principles for good and responsible business management, which applies to the employees, as well as the management of companies. Corporate… …setting-up of management and control structures. Characteristics of good corporate governance are: – Functioning business management – Preserving the… …interests of various parties (e.g. the stakeholders) – Targeted cooperation between business management and business monitoring – Transparency in the… …corporate communication – Appropriate handling of risks – Management decisions are aimed at long-term value enhancement The German code does not create… …pursuant to Article 161 AktG (German Companies Act), the management board and supervisory board establish, on an annual basis, whether the recommendations… …of the Corporate Governance Code have been com- plied with or if deviations have occurred. IT compliance is represented by risk management, data… …the management of a GmbH (limited liability company), Article 43 Par. 1 GmbHG (Limited Liability Companies Act), obligates the management to apply the… …management of a GmbH. Since January 1st 2009, the Law on the Modernisation of Company Annual Accounts (BilMoG) has expanded the group to include companies…

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• eBook-Kapitel aus dem Buch Global Management Challenges for Internal Auditors

  Continuous Auditing: Myth and Reality

  Adrian Garrido

  …conceptual models not being just appearance but having real results in management improvements. Continuous Auditing has traditionally been defined as the… …system of daily Alerts related to credit, operational, fraud and compliance risks. These alerts are investigated by a specialized team that interacts… …, two more can be added: – First, at some point in the future the management could consider that the monitor responsibility is theirs and not that… …selecting what is truly relevant. And what is, to a great extent, the most relevant information for a business? The minutes of the Management Committees… …, Regulatory reports, Management Infor- mation, presentations of new projects, new in the press, the minutes of our meetings with the various business areas…… …retrieve relevant information for each of these units. Once again, we are not speaking of complex applications; but rather of a documen- tary management… …and level of importance, for example: – Periodic analysis of management information – Periodic or specific meetings with Management – Focused… …great detail the business, maintaining a fluid line of communication with Management and using technology in an intelli- gent manner.…

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• eBook-Kapitel aus dem Buch Global Management Challenges for Internal Auditors

  The Financial Sector: Risks, Controls and Assurance after the Financial Crisis

  Daniel Nelson

  …management failures. 1 The Roots of the Crisis The macroeconomic aspects tell us the financial crisis was preceded by the culmi- nation of a long-lasting… …management. Nelson 94 For what concerns the underlying policies causes, three examples can be made. Ba- sically, the regulatory and supervisory… …situation. Lastly, risk management. One aspect is that risk management or risk mitigation has been viewed as more of a nuisance, more a need to adhere… …area in an entity. Nelson 96 It has also been reported that enterprise risk management (ERM) and the finance complex did not have adequate… …lesson-learned here is obvious: internal audit should review the risk management governance and op- erational arrangements, to ensure that there are no such gaps… …requirement compared to the 2006 charter. The second change in the 2009 charter is the new wording added to the risk management section which indicates that… …the audit committee is not the only body responsible for oversight of AIG’s risk assessment and management. The 2009 charter also goes on to state… …management. 5 Four more steps In closing, I want to suggest the following four specific areas to be considered for audit work by internal audit. As… …mentioned, risk management will certainly be an area to focus internal audit’s attention on; admittedly, the current crisis involved both external risks and… …priorities of the or- ganization. Some might say that “back to basics” should also include an increased emphasis on testing and focus on fraud weaknesses that…

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• eBook-Kapitel aus dem Buch Global Management Challenges for Internal Auditors

  Doing More with Less

  Neil Baker

  …against the budget cuts. He told senior management at the mining company where he is the head of internal audit that pruning audit resources in a downturn… …changing economic climate. A third of organisa- tions in the survey say the downturn is affecting the focus of their work, with the risk of fraud… …work on procurement fraud; for example, trying to spot fraudsters who submit fictional invoices in the hope they’ll be paid. It is also checking the… …wouldn’t wait for senior management to come to me and say, ‘We are all contribut- ing toward cost cuts: It’s your turn,’” LaTorre says. Fucilli agrees. “Be… …audi- tors from other departments. 4. Do not go it alone. Remain in direct, constant communication with the audit committee and management so that you…

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