Abstract
This Chapter gives the definition of external audit, types of it, and displays the importance of external audit under quality control perspective title. Then follows developments in auditing, importance of high-quality audits, the interactions between financial reporting and the audit quality, the relationships between external audit and fraud, and frauds in the twentieth century. This way the increasing demand for high-quality external audits are presented under the title emphasizing the necessity of external auditing. The extent the external auditors are involved and responsibilities of them in those frauds are discussed. The Chapter also discusses the Sarbanes–Oxley Act, which is perceived as a reaction to frequent frauds in the last quarter of twentieth century.
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L. Fitzpatrick (1939). The story of bookkeeping, accounting, and auditing. Accountants Digest, IV, 217.
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McKesson & Robbins case will be handled in detail in the following pages.
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401(k) plan : A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis.
Caps placed by the plan and/or IRS regulations usually limit the percentage of salary deferral contributions. There are also restrictions on how and when employees can withdraw these assets, and penalties may apply if the amount is withdrawn while an employee is under the retirement age as defined by the plan. Plans that allow participants to direct their own investments provide a core group of investment products from which participants may choose. Otherwise, professionals hired by the employer direct and manage the employees’ investments (www.investopedia.com, 28.03.2014).
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Thrift savings plan (TSP): Congress established the TSP in 1986 and it offers the same types of tax benefits and savings as a 401(k). Each pay period, the agency the employee works for deposits 1% of the employee’s basic pay into the employee’s TSP. On top of that, the employee has the option of making additional contributions, which the agency will match (up to 4% of employee pay). These extra contributions are tax-deferred and administered by the Federal Retirement Thrift Investment Board. Just like a 401(k), you can choose how these funds are invested. Upon setting up the TSP, you will be given a list of fund choices. Since TSP does not function as a pension like the Basic Benefit Plan and Social Security, employee’s earnings in future would be based on the funds chosen, the amount of money contributed above the amount what the employer deposits and market conditions that are outside of control. http://www.investopedia.com/articles/personal-finance/062513/what-federal-employees-retirement-system-fers-and-how-does-it-work.asp, 28.03.2014.
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J. Michael Cook : Chaired the audit committees at Burt’s Bees, International Flavors & Fragrances, Comcast Corporation and Eli Lilly & Co. Chairman and CEO of Deloitte Haskins & Sells. Retired Chairman and CEO of the Deloitte & Touche in 1989.
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Maersk Group: Integrated transport and logistics company with multiple brands and is a global company in container shipping and ports. Including a stand-alone energy division, the company employs roughly 88,000 employees across operations in 130 countries (www.maersk.com).
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Ponzi Scheme : is a fraudulent investing scam promising high rates of return with little risk to investors. Returns for older investors are paid by acquiring new investors. Eventually, there is not enough money to go around, and the schemes unravel (www.investopedia.com, 10.03.2012).
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AICPA: Founded in 1887 as American Association of Public Accountants (AAPA), the AICPA represents the CPA profession, is renamed a few of times. 1917–1957 was the era of American Institute of Accountants (www.aicpa.org, 04.11.2012).
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Understanding the client’s business: knowledge of a client’s business enables the auditor to evaluate the reasonableness of client transactions. Not limited to these: information regarding client’s organizational structure, business strategy, product markets, operating philosophy, and contractual relationships (Erickson et al. 2000).
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Kesimli, I. (2019). External Audit from Quality Perspective. In: External Auditing and Quality. Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application. Springer, Singapore. https://doi.org/10.1007/978-981-13-0526-9_1
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DOI: https://doi.org/10.1007/978-981-13-0526-9_1
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