SEC Accounting and Auditing Enforcement Essay Example | Topics and Well Written Essays - 1000 words

SEC Accounting and Auditing Enforcement - Essay Example In this regard, The Securities and Exchange Commission announced charges against three auditors who violated federal security laws. They failed to comply with the U.S. auditing standards in conducting their audits. Among the three audit failures and in their SEC enforcement efforts, the one on WOWJOINT Audits is the most shocking. Wowjoint is a company with its headquarters and operations in and around Beijing, China. Its ordinary shares, warrants, and units are registered with the commission pursuant to Section 12(b) of the Exchange act. The manner in which its audits are conducted makes it the most shocking given the series of the failures and the magnitude of the same. The facts around these audit starts by stating that there was no adequate planning and supervision of the audits as required by the PCAOB Standards. This means that in the first instance the Auditors did not possess adequate knowledge of the firm they were auditing as required by the standards. The second and most s ensitive part of the failure is the fact that the Audit team failed to Test Wowjoint’s Revenue computations and this is again due to Valleau and Epstein’s lack of proper audit planning, failure to design and perform adequate audit procedures and general lack of knowledge of how firms in China operate (Murphy, 2013). Furthermore, there was a failure in conducting enquiry a scenario that resulted into insufficient information. The failure to conduct sufficient inquiry and procedures contravened the Standard AU Section 561. The other critical failure in this auditing procedure was the failure by the auditors to perform adequate auditing procedures to aid in determining the collectability of Wowjoint’s large and long outstanding Accounts Receivables hence a contravention of PCAOB Standard 326- Evidential matter. The ignorance of accounts receivables normally have great impacts on assets most so current. In addition to the above, there was inadequate retention of doc umentation as well as review of the work papers. Al the reasons stated above support the fact that among the three audit failures, the manner in which audit was conducted in Wowjoint is the most shocking (Murphy, 2013). B. Violations in the AICPA Code of Professional Conduct and the NYS Rules The act by the Auditors in Wowjoint’s case has generally gone against the general provisions as prohibited by the Rules of the Board of Regents, part 29-Unprofessional Conduct. Under  § 29.10 Special provisions for the profession of public accountancy, unprofessional conduct shall include all the conduct prohibited by this section. The first violation is the failure to adequately plan and supervise the audit as required by AICPA and the NYS rules. According to this, an accountant is therefore obligated to always disclose material fact concerning financial statements as this makes such statements not misleading (Murphy, 2013). The section further prohibits a professional accountant allo wing a any other person to practice other than a partner, furthermore, the accountant must not at any point issue the use of their name in presentation of reports as this is only accepted for a qualified public accountant or with the approval of the same individual (http://www.op.nysed.gov/title8/part29.htm#cpa). Secondly, the flouting AICPA rules by audit when they failed to Test Wowjoint’s Revenue Computations. The accountant is required to submit working papers at all times. Failure to do so will result into scenarios where the applicability of a requirement is within the documentation and is rendered redundant. Definition as used in paragraphs will as well be impaired concerning what work papers mean, the documentation of such working papers and the time