assignment 3

Topics: Auditing, Audit, Internal control Pages: 20 (1086 words) Published: February 1, 2015

Submitted by
Mohammed A Khan

Submitted to
Prof: Wendy Achilles
Course: Acc 562 Advanced Auditing
Dated: 12-14-2014

• Freescale Semiconductor Inc. (FCI) is a global
leader in embedded processing solutions, providing
industry leading products that are advancing the
automotive, consumer, industrial and networking
• From microprocessors and microcontrollers to
sensors, analog integrated circuits and connectivity –
FCI’s technologies are the foundation for the
innovations that make the world greener, safer,
healthier and more connected.

Continued from previous slide
• Some of Free scale's key applications and end-markets
include automotive safety, hybrid and all-electric
vehicles, next generation wireless infrastructure, smart
energy management, portable medical devices,
consumer appliances and smart mobile devices.
• The company is based in Austin, Texas, and has design,
research and development, manufacturing and sales
operations around the world.

Regulatory bodies that are involved to eliminate
Financial Fraud
1. COSO And Tradeway Commission: The Bodies are
very much involved in establishing an integrated internal
system for companies, their managements and their
auditors. They are designed to provide reasonable
assurance that the company achieve its objectives in the
following areas:
– Reliability of financial reporting
– Compliance with applicable laws and regulations
– Effectiveness and efficiency of operations

Continued from previous slide
2. THE SABANES–OXLEY ACT 2002 (SOA): The intent
of the SOA is to reduce the likelihood that material
fraud will go undetected. The SOA includes the
following major provisions – The creation of the Public Companies Accounting Oversight Board (PCAOB)
– Rules designed to increase auditor independence
– New responsibilities for corporate directors, chief
executive officers and chief financial officers
– Enhanced financial disclosures.

Continued from previous slide
3. PCAOB - The PCAOB is a five-member board of
financially literate members. The board has the
authority to establish auditing standards, quality control
standards, and independence standards for audits of
public companies. In addition, the PCAOB has the
authority to inspect the work of public company
auditors. The PCAOB deliberations result in the
adoption of rules that are submitted to the SEC for
approval. Prior to the Sarbanes-Oxley Act, the AICPA
Auditing Standards Board was responsible for these
functions on a self regulatory basis.

Continued from previous slide
It is observed that most of the cases that fraud
occurred within the consent and presence of the
highest authority of the organization who is basically
empowered to monitor the whole process. So, when
the authority is guiding to manipulate the accounting
information for their personal interest, it is very difficult to resist them by formulating laws.

Insider Trading
Definition of Insider trading:
A crude way of understanding the issue is the "abstain
or disclose" rule: You have material non-public
information that others don't have. You either disclose
it to the counter-party, or you just don't trade. That's
actually not really the law; the law is much more
nuanced than that. But it's a healthy attitude to have
from an ethics perspective.

Role and Remedy of SEC
There are numerous bodies monitoring trades. In-house
counsels routinely get requests asking the company to
disclose information around particular events. SEC is the
vital player to monitor the whole ground. Role of SEC –
a. Protecting the whistleblower
b. Constant monitoring of every case that have been
accused by others.

Continued from previous slide
c. SEC should focus beyond geography like social
networks. A lot information are running in every
d. Specialized knowledge of the business listed in the
stock exchange....

References: • Auditing: A business Risk Approach with case written
by Rittenberg, Johnstone, Gramling , Knapp
• National Fraud Information Center, Fraud Warnings,,, February 4, 1997
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