Jamaica Water Properties Internal Audit

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Table of Contents

Responding to suspicious items in Accounting Records
Measures for enhancing Whistle Blowing in a company
Promoting ethical behavior among employees
Reducing Auditing Risks
Accounting professional’s responsibilities to shareholders
Reference List

Responding to suspicious items in Accounting Records

As a professional accountant, I would apply the professional ethics of accounting that require professionalism, accountability as well as integrity in monitoring the daily operations of the organization so as to be able to report accurately the strengths and weaknesses of the organization’s internal control system to the CEO.

Just the same way David Sokol did, it is important to scrutinize the company’s accounting records and interview all those concerned with accounting operations of each division in the company as well as the company’s Chief Financial Officer.

It is important to take responsibility and inform the CEO or the board of directors of the company about your findings on the company’s accounting fraud and your opinion and, give direction of what should be done to correct the accounting abuses in the company (Gibson, Knapp, Mowen, Palepu, & Shank, 2010).

In situations where I have convincing reasons to believe that the auditing firm that had been contracted to audit the firm’s financial statements might have been influenced so as to ignore the suspected misrepresentations in the financial statement data, I would advice the board or the CEO to retain a different independent auditing firm to investigate the accounting the records.

Measures for enhancing Whistle Blowing in a company

In order to enhance the capacity of corporate employees to report suspected fraud scheme cases in the organization, the firm should increase the internal auditors’ influence by permitting them to report directly to the CEO or the board of directors on their findings as well as their views of what should be done to save the situation (Gibson, et al. 2010).

Their findings and opinions need to be treated with a lot of confidentiality and proper follow up be taken immediately. The function of the internal auditors should not just be to report to the company’s CFO as in the case of Jamaica Water Properties.

The internal auditors need to be independent and not under the jurisdiction of the CFO, this way, they will be assured of their job security and therefore overcome bullying from the CFO or any other senior personnel in the organization.

The company should also put in place policy requiring the internal auditors to have unrestricted access to the audit results of the external auditors and the company’s accounting records in order to effectively determine irregularities, manipulations and fraud risks that may occur in the company’s financial statements and be able to report this to the CEO (Chhaochharia, & Yaniv, 2007).

Promoting ethical behavior among employees

It is the corporate responsibility of each employee in the organization to report suspected cases of misbehavior such as fraud to the relevant authorities as is provided in the business code of ethics. Besides, each organization has internal policies to guide the ethical conduct of workers. These policies should help employees report cases of unethical behavior by employees.

The company should therefore disseminate information to all employees of the standards of behavior expected of them and steps to take in case they observe or suspect unethical behavior and also implement internal control systems that could help eliminate financial fraud in the company (Boatright, 2003). According to Beaulier, Hall, & Kotkin (2009), rewards also help promote ethical behavior in employees.

However, rewarding ethical behavior may cause unnecessary divisions among employees and may also make employees be dependent on rewards to enhance ethical behavior.

Therefore, this should be done diligently since giving incentives especially monetary benefits to promote ethical behavior in employees may create a culture where employees are unable to differentiate bribe and reward. As Sokol says, employees in an organization should be guided by integrity and honesty.

Reducing Auditing Risks

The board of directors and company’s CEO should first acknowledge that the personal relationship that had been created between the retained auditing firm and the personnel in charge of the company’s accounting may have an impact on the results of the auditing. Therefore they should request that the auditing team present their results and opinions to the board of directors (Chhaochharia, & Yaniv, 2007).

They should present a critical analysis of their findings so as to enable the board make proper financial decisions. The board of directors should rely on the internal auditors to improve their knowledge on audit items and audit evidence.

This would enhance the board members’ capacity to analyze the strategic risks and potential fraud in the company’s business processes. The company should not rely on one auditing firm to carry out consecutive auditing of the firm’s accounting records.

Retaining different audit firms would help identify misrepresentations if any that was ignored by the previous audit firm that had been retained to audit the firm’s financial records. Sokol’s decision to request the board of directors to contract a different firm other than Ernest & Young paid off as Deloitte & Touch were more independent in their presentations.

Accounting professional’s responsibilities to shareholders

As an accounting professional, it is important to carry out comprehensive investigations into the manipulations that had been done in the accounting records of the company and report the findings to the board of directors and explain their impacts on the financial activities of the company as well as remedies for the for minimizing further losses.

The accounting professional should be able to determine the real figures of the fraud as well as the period for which the fraud had existed in the company. The accounting professional should also be able to determine what happened as well as the individuals in the organization responsible for the fraud (Gibson, et al. 2010).

This would help the board of directors provide accurate information to the shareholders which can therefore enable them make their decisions on how to respond to the company’s financial statements.

Reference List

Beaulier, S, Hall, J, & Kotkin, R. (2009). The virtue of business: How markets encourage ethical behavior. New York: Nova Science Publishers.

Boatright, J. R. (2003). Ethics and the conduct of business, 4^th Ed. Malden, MA: Blackwell Publishers.

Chhaochharia, V. & Yaniv, G. (2007). Corporate governance and firm value: The impact of the 2002 governance rules. New York: Nova Science Publishers.

Gibson, C. H., Knapp, M. C., Mowen, M. M., Palepu, K. G., & Shank, J. K. (2010). Graduate accounting capstone. Mason, OH: Cenage Learning

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