Essay about Sarbanes-Oxley Act Of 2002: Case Study

1- public accounting firm is a firm that registered by the public accounting oversight board so it provides accounting service to public company. Sarbanes-Oxley Act of 2002 contains provision preventing any company which is not registered with the board from, furnishing, participating in an audit of a public company or preparing. the different categories of public accounting firm are as follow: (Local I Regional National Big 4 Alternative Practice Structures) Also there are different types of accounting firm such as public accounting, Tax accounting, forensic accounting, bookkeeping.

The name of external auditor of unikai is Mohammed tareq( KPMG lower gulf limited. 2- The auditors have great roles to play in the society, there are many hypothesis that shows why the audits is demanded in our society. Under the information hypothesis auditors are demanded to reduce information risk to users of financial statements, losses due to fault decisions occurred from errors or irregularities in the financial statements. Another hypothesis explains the high demand for audits is the monitoring hypothesis.

As the hiring of an external auditor to monitor the cost of activities is important Agency theory predicts that utility-maximizing agents (the managers), if unchecked, will consume resources more than optimal. The insurance hypothesis predict that auditors are demanded and has responsibility against business failure. If investor purchase securities on the basis of audited F/S and lose them the law provides some degree of recourse against the auditor. 3- between its many duties the audit committees is required under Sarbanes oxley act to:

Review the report by the independent auditor and describe the auditor’s internal procedures, quality control, also relationships between the company and auditor. Discuss the annual audited financial statements and quarterly financial statements with the management and independent auditor and, including the company’s specific disclosures under Management’s Discussion and result of operations and Analysis of Financial Condition. Discuss the company’s earnings and press releases, also earning guidance and financial information. Assess the company’s risk assessment and risk management Policies.

Separately meet with management, internal auditors and Independent auditors on a periodic basis. Report regularly to the board of directors. 4- As mentioned in the annual report the responsibilities of external auditor is to express an opinion on the consolidated financial statement based on their audit. They conduct their audit in accordance with (international standards on auditing), these standards require them to comply with ethical requirement and perform and plan the audit to gain reasonable assurance about if the consolidated financial statement are free from material misstatement. – The material misstatement means that the financial statement of organization has been misstated to a material degree, these material misstatement are detected by auditors. As mentioned in the auditor independent report, an audit involves performing such procedures to obtain audit evidence about the disclosures in the financial statements.

The procedures contain assessment of the risk of material misstatement of the consolidation financial statement whether because of fraud or errors. While making those risk assessment external auditors consider internal control relevant to the entities fair presentation and preparation of the consolidated inancial statements in order to design audit procedure which appropriate to the circumstances, but not for expressing opinion on the effectiveness of entities’ internal control. An audit includes evaluating the reasonableness of accounting estimates made by management and also evaluating the total presentation of the consolidation financial statement. 6- what is meant by assurance services is that the broad range of information enhance services which provided by (cpas) certified public accountant. there are two types: O Increase reliability of information Puts information into a form or context that facilitates decision making.

The types of assurance: (Attestation Services) for Example: Audits of Financial Statements, Examinations of Internal Control (Other Assurance Services) For Example: CPA Elder Care Prime Plus Services Non-assurance Services Tax Services Management Consulting Services Other an example of assurance from the annual report the auditors opinion in the independent annual report which elaborate that the consolidated financial statements present fairly, the consolidated financial position of the group and its consolidated cash flow for the year ended in accordance with IFRS. – the external audit report on the presentation of financial statement type is independent report, and unqualified report . the Financial statements that audited by external auditor are the income statement, balance sheet , owners’ equity. The other consolidated financial statement of the group which audited by another external auditor were four the year ended 31. dec 2014. And express an unqualified opinion on that F/S. 8- The auditors are responsible to perform and plan the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

Whether caused by fraud or errors, but on the other hand The audi hasn’t responsibility to “detecting” fraud. The purpose of the audit is to determine whether the Financial Statement present fairly in all material aspects of the financial position and performance of the business. The auditors responsibility also mentioned in the annual report, the auditor perform procedures including assessment of the risk of material misstatement of the consolidated financial statement, whether due fraud and error. -The audit risk is the risk that financial statements are materially incorrect, even if the audit opinion states that financial reports are free of any material misstatements. Audit risk includes two elements the risk of material misstatement and the risk that the auditors do not detect such misstatement (Detection risk). Audit evidence is the information used by the auditor at the conclusions on which the audit opinion is based. It includes information contained in the accounting records underlying the financial statements and other information. Auditor must obtain sufficient (quantity of audit evidence that should be obtained).

The major types of audit evidence are (Physical examination, Third-party representations- Confirmation, Documentation, Data interrelationships—Analytical procedures, Client representations, . Recalculation, Computations, Performance, Observation) appropriate (quality of audit evidence that should be obtained) audit evidence. Auditors can reduce risks by following four guidelines : Accurate processing Policies and procedures in place Safeguards against fraud risks Operational risks and information systems controls. 10- Using explanatory notes provide a way for the reader to access additional information if they feel it is necessary.

It allows an easily access to place for complex definitions or calculations to be explained. Explanatory notes may also include information about future activities that are anticipated to have a notable impact on the business or its activities. These notes are important to the users because it fulfilling the needs of the external users of the financial statements. Types of explanatory notes are as follow : NOTES THAT EXPLAIN INTANGIBLES for example from the consolidated statement of financial position of unikai the amount of intangible assets as for (461).

NOTES ABOUT VALUING INVENTORY, in the notes of significant accounting policies in the paragraph of inventories they states that inventories are measured at the lower of cost and net releasable value. NOTES THAT SPELL OUT EMPLOYEE BENEFITS, in the annual report notes the group states there obligation towards the long term employee benefits, it’s the amount of future benefits that employee have earned in return of their services. The notes also mentioned the foreign currency as its differences arising recognized as profit or loss as an income or finance cost.