February 2_Enron Corporation and Anderson, LLP

Auditing Cases: An Interactive Learning Approach (4th Edition)

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3.4 Worldcom 1. Entity audit committees must establish procedures for receiving, keeping, and acting on complaints regarding accounting, internal accounting controls, or auditing matters. There must also be present a way to submit these complaints anonymously and confidentially. 2. Grant Thornton’s Model: a. Understand the stakeholders and their needs i. Internal Users ii. External Users iii. The accused iv. Other interested parties b. Step one – receive i. Accepting incoming complaints ii. Screening complaints iii. Documenting complaints c. Step two – analyze i. Sensitivity- laws broken; who; potential pub. Reaction; etc. ii. Materiality d. Step Three – Investigate i. Appoint/create an investigation team ii. Conduct the investigation e. Step four – Resolve i. Plan corrective action ii. Implement corrective action f. Step Five – Report the resolution of the complaint g. Step Six – Retain the necessary documentation 3. Attribute Standards 1100-Independence and Objectivity The internal audit activity must be independent, and internal auditors must be objective in performing their work. Interpretation: Independence is the freedom from conditions that threaten the ability of the internal audit activity or the chief audit executive to carry out internal audit responsibilities in an unbiased manner. To achieve the degree of independence necessary to effectively carry out the responsibilities of the internal audit activity, the chief audit executive has direct and unrestricted access to senior management and the board. This can be achieved through a dual-reporting relationship. Threats to independence must be managed at the individual auditor, engagement, functional, and organizational levels. Objectivity is an unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others. Threats to objectivity must be managed at the individual auditor, engagement, functional, and organizational levels. 1110-Organizational Independence The chief audit executive must report to a level within the organization that allows the internal audit activity to fulfill its responsibilities. The chief audit executive must confirm to the board, at least annually, the organizational independence of the internal audit activity. 1110.A1 - The internal audit activity must be free from interference in determining the scope of internal auditing, performing work, and communicating results. 1120-Individual Objectivity Internal auditors must have an impartial, unbiased attitude and avoid any conflict of interest. Interpretation:
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February 2_Enron Corporation and Anderson, LLP - 3.4...

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