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Be alert to the possibility of management fraud

Article Abstract:

Auditors have a unique, often court-sanctioned, role in the detection of managerial fraud. Such fraud could range from changing or falsifying a document to complex computer fraud with the motives being just as varied. The auditor must be able to distinguish irregularities from actual fraud. There are certain signs the auditor can look for that point to possible fraudulent activities. These signals could be noticing unusual private financial activities of major officers of the corporation, unusually large bonuses given, adverse liquidity ratios and high levels of gearing. Recent U.S. research resulted in the following groups of areas to watch: (1) questionable integrity of management officers, (2) weaknesses in internal control, (3) financial and economic pressures, (4) improper transactions between related parties, (5) inadequate disclosure, (6) questionable accounting transactions,(7) auditor lack of understanding, and (8) other generally accepted auditing standards violations.

Author: Gwilliam, David
Publisher: Institute of Chartered Accountants in England & Wales
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1986
Analysis, Investigations, Auditors, Fraud investigation, Commercial crimes

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A contribution the negligent should make

Article Abstract:

The ways in which auditors can attempt to recover damages from responsible parties, after being sued for losses caused by alleged negligence in the performance of their duties, are examined. The question of whether auditors can relieve their burden by using a contributory negligence defense is discussed in detail. Several specific cases are used as examples, including two Canadian cases: H.E. Kane v. Cooper & Lybrand, and Revelstoke Credit Union v. Miller, Berry.

Author: Gwilliam, David
Publisher: Institute of Chartered Accountants in England & Wales
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1987
Accounting and auditing, Malpractice, Bankruptcy

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What does reasonable care and skill entail?

Article Abstract:

Auditors must exercise reasonable care and skill for the purposes of civil liability. Results from two Canadian lawsuits involving auditors suggest that the standards for determining reasonable care and skill have become more exacting in recent years. The cases are: Kane versus Coopers and Lybrand, and The Revelstoke Credit Union versus Miller, Berry. These cases are analyzed to illuminate what constitutes adequate audit performance.

Author: Gwilliam, David
Publisher: Institute of Chartered Accountants in England & Wales
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1987
Cases, Accounting, Liability (Law), Legal liability

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Subjects list: Laws, regulations and rules, Auditing
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