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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

  …confidence in India Inc., and it is very difficult to restore their confidence.” In 2009, Satyam Computer Services was the fourth-largest Indian… …expanded it from a handful of employees into a back-office giant with a workforce of 53,000 and operations in 66 countries. Satyam delivered… …outsourcing solutions to nearly 700 clients, including 185 “Fortune 500” companies. Thus, it served as the back-office for some of the largest banks… …responsible for clients’ finances and accounting.) “For years, Ramalinga Raju was lionized as one of the whiz-kids of the Indian IT sector,” said one… …started as a mar- ginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has… …attained unmanageable propor- tions as the size of company operations grew,” Raju wrote. “It was like riding a tiger, not knowing how to get off without… …lents were, in fact, made out of thin air. Revenue for the quarter was 20% lower than reported, and the company’s profit margin was a fraction of what it… …staff. – Merrill Lynch, the U.S. investment bank, was engaged by Satyam to explore merger opportunities for the IT outsourcing giant. But within just… …fluctuations in the amount of “unbilled revenue” the company reported. (Unbilled revenue is work done for a customer but not yet invoiced: it represents future… …earnings. Accounting Fraud in Asian Companies 252 However, there is usually little documentation associated with the number, so it is easy to…

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• eBook-Kapitel aus dem Buch Accounting Fraud

  Fraud Theories

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …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… …less rationalization it takes to motivate someone to commit a fraud. Likewise, the more dishonest a person is, the less opportunity or the less… …pressure it takes to motivate fraud. Fraud-fighters focus their preventive efforts primarily on only one of the three elements of the fraud triangle… …simply in the outcome. Scientists call this motivation the “ego challenge”: it relates to the sense of superiority over others and to the gratification… …obtained from the mastery of an exciting situation. It also reflects the pride of a professional “con artist”. Attitudes are the values and ethical… …honest all the time. Another 20% are basically dishonest, and about 60% are “situationally honest” (that is, honest where it pays to be honest and… …dishonest where it pays to be dishonest). However, most of the organizations are convinced that their executives are among the 20% who are honest. Unfortu-… …nately, quite frequently, this is not the case. Rationalization is how the fraudster justifies his inappropriate actions. In other words, it is the… …soon as we get over this financial difficulty.” – “Business is business. Everybody else does it.” Of course, there are countless other…

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• eBook-Kapitel aus dem Buch Accounting Fraud

  Chapter 4: Conclusion and Outlook

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …, relatively infrequent in occurrence), and it must be shocking (that is, counter to our norms and values). Wilson argued that the public pays little attention… …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… …a super- human task. However, a review of the scandals shows that in most of the cases, it is basically the same common pattern. A company faced… …. Often it starts as a one-shot deal to meet short term fi- nancial expectations. But it escalates to ongoing fraudulent activity until, with some… …accounting fraud can be summarized as follows (see Young 2004, pp. 11–13): 1. It generally doesn’t origin from conscious dishonesty. It doesn’t start… …because the CEO is dishonest, or because the CFO is dishonest. It also doesn’t start because the company had the misfortune of hiring a group of dishonest… …employees in its accounting department. 2. It origins from pressure. In particular, it starts with an environment in which two things are present… …: challenging targets of financial performance, and the perception that missing these targets will be viewed as unforgivable. 3. It starts out small. The… …fraud starts with little alterations of results (typically in the form of borrowing from future quarters). It doesn’t start with a grand plan or… …conspiracy. Often, the one or two perpetrators don’t even realize that they are stepping over the line and might be violating accounting standards. 4. It…

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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

  …290 Appendix: Practice Aids Appendix I A Practice Aid for Company Executives: The Ethics Barometer It is essential that the board and… …. However, it is advisable to tailor the content of the barometer to the situation in which the organization finds itself. For achieving customization… …honest and reliable: he does as he says and fulfils his responsibilities. A.11 In my immediate working environment, it is sufficiently clear how… …. 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… …standards of conduct is provided to me when I need it and is clear and easy for me to understand. C.4 The training is effective in guiding my decisions… …first-hand knowledge about misconduct, I would feel comfortable reporting it to my colleagues or my supervisors. C.8 If I observed or had first-hand… …knowledge about misconduct, I would feel comfortable reporting it to the ethics hotline/the compliance department. C.9 As a result of the incident… …fraud awareness sessions is adequate. C.18 The company has established its compliance policy by means of a long- term integrated plan. It regularly… …standards of con- duct, I think it would be because they are trying to help the organization achieve its goals and meet its business targets. D.5 If a… …manager or a colleague does something which is not permitted, some- one in the organization will find out about it. E. Personal Data (optional)…

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• eBook-Kapitel aus dem Buch Accounting Fraud

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

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …practice aid designed to help the audit team to plan and tailor these fraud interviews as required by the international auditing standards. It in- cludes… …all the relevant topics to be covered with suggested questions. It is not meant to be used as a questionnaire, seeking answers to each question in… …monitor operating locations? How does it monitor these locations and what has it found? – Are there locations, business segments, activities or… …fraudulent financial reporting or misappropriation of assets? – Where in your organization would it be the easiest to commit and/or the hardest to detect… …how it believes the internal control structure serves to prevent and detect material misstatements due to fraud? If so, what was reported?… …controls through year-end adjustments or significant unusual transactions? – Does internal audit monitor operating locations? How does it monitor these… …locations and what has it found? – Is internal audit concerned about the integrity (as it may relate to fraudulent financial reporting or misappropriation… …Officer / Chief Ethics Officer – Has the company established an ethics code? If so, how was it introduced? Is it a helpful guidance on ethical… …dilemmas? Does it cover international dimensions? How openly are ethical issues discussed? Is the process of communication effective? – What… …company’s IT internal control? How do you believe the IT internal control structure serves to prevent or detect material misstatements due to fraud? Please…

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• eBook-Kapitel aus dem Buch Revision des externen Rechnungswesens

  Prüfungsfelder

  …Eingangs- rechnung nicht selbständig oder mit Hilfe der IT überprüfen kann, wird die Rechnung vor ihrer endgültigen Freigabe in der Regel der Bedarfstelle zur… …ausreichende Funktionstrennung zwischen Anlage/Pflege von Kreditorenstammdaten und der Durchführung von Buchungen/Zah- lungen gegeben? Das in der IT… …Zahlungseingängen gege- ben? Das in der IT hinterlegte Berechtigungskonzept muss gewährleisten, dass für die Anlage und Pflege von Stammdaten verantwortliche Mit-…

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

  Internal Audit Standards: Everything for Everybody

  Inta Ozolina

  …they should do it. We all know that the Standards are extensive, cover most key areas of internal audit profession and work. Even more – the… …the management and owners? I do not think so. Does it make the compliance for smaller audit teams very hard if not impossible to obtain? Yes, it does… …assessment because the requirements are just unrealistic, the Standards really lose their meaning. I think it is a high time to raise this discussion and…

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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

  …Framework which came into effect on January 1, 2009. Although the new framework is consistent with the previous framework, it contains some significant… …established itself as the struc- tural basis for the activities of the Internal Audit. It is a self-contained framework which is recognized internationally by… …summer 2007. In order to emphasize the international focus of the framework, it was renamed as the International Professional Practices Framework (IPPF)… …consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a… …perform audit engagements. In order to effectively help the board and the management, it is necessary that the Internal Auditors behave in a professional… …IT audits and other IT-related issues. ___________________ 9 Cf. The IIA (2009a), p. iii. 10 Cf. The IIA (2009a), p. v. 11 Cf… …. Significance The relative importance of a matter within the context in which it is being con- sidered, including quantitative and qualitative factors, such as… …reasons of independence. Standard 2110.A2 specifies that the Internal Audit activ- ity must assess whether the IT Governance of the organization supports… …2430 makes it clear that Internal Auditors may report that their engagements are conducted in conformance with the Standards only if the results of the… …and transparent processes. These processes make it possible for the IIA to issue guidelines faster. They also provide Internal Auditors with the…

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

  Efficient Risk Management in Leasing Companies

  Prof. Dr. Fikret Hadžiæ, Amir Softiæ

  …leasing subject (movable or fixed property) and gives it to the lease recipient to use for a certain period of time with the lease recipient being obliged… …to periodically pay the lessee in accordance with the contract. Leasing is a very important source of medium and long-term financing. It is an… …. It is especially conven- ient for small and medium-sized businesses that, quite often, do not have an access to commercial bank loans. Also, leasing… …certain leasing subjects, significantly increases their approval risks and leads leasing companies to an almost identical dilemma, as it does the banks… …conditions”. How- ever, regardless of the adoption of this legal framework, it is evident that the global economy crisis influenced the change in the work… …service to protect assets and achieve a competitive advantage), it is necessary to develop an IT supported appli- cation. We will call this type of… …. It includes data about the cli- ent, transaction, leasing subject and collateral, leasing application status, scoring result, and repayment of leasing… …proval to the maximal amount of rent/lease, and – A developed system of competency holders. These can be individual holders or a collective body. It is… …rulebook on competencies, in which it is unambiguously regulated to whom the competencies have been allocated, under which conditions and up to which… …value. Bearing this fact in mind, which de facto includes International Accounting Stan- dard IAS 39 as well; it is evident how important it is for…

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

  Company Culture is Worth the Cost

  Sergey Martynov

  …if it is not included in financial reports, and helps to generate value for a company: it should therefore be audited, just like all other company… …than those caused by unfair competition or mass- media hostility. First of all, it is important to understand that company culture is a distinctive… …guaranteeing success and in the effi- ciency of a business, for various reasons. Firstly, it results in increased employee loyalty towards the company. A… …salary increase. 2 Development of Company Culture While in some organisations company culture is created and grows spontaneously, in others it is… …beliefs, come from various different entities. In these situations it is extremely im- portant for the management to make an effort to rapidly develop a new… …can be positive, but the process of establishing a com- pany culture by example may take a long time. It is extremely important, however, for the… …in order for this to happen it must know how to satisfy the individual needs of its employees. The management must also know how to value its workers… …employees, who will cer- tainly not share or defend its values as a result. It is also extremely important to en- sure that there is a relationship between… …, and it is es- sential that each member of the team feels that he is sharing in the recognition for his work. The development of company culture is… …it: it is therefore a factor that should be taken into consideration by the internal audit, just like all other signifi- cant company processes…

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