Accounting Auditing

[Name of the Institute]

Accounting Auditing

Answer 1.

According to IAS, writing down inventory in the disclosure of the income statement is low perseverance item. There is the requirement for the separate information is required for the disclosure of financial statement. There are various risks that are involved in writing down of inventory. It can also be overestimated by investors earning perseverance. These statements in which there are written down of inventory takes place can also be overestimated by investors. It is also strong concern against ethical code of conduct. There are various issues of finance and ethics that could occur and also as a result the manager might have to pay extreme compensations for disguising penalties of fraud. It may also lead to the loss in the believe and trust of shareholders. As an outcome organization would losses its good will and brand image. Accountants who overlooks the financial statement makes sure that the statements are according to standards of accounting and also there is no violation of ethical and professional behavior of trust (Mackenzie. 2012).

CEO, as he is the partner of the practicing firm, should be aware of the impact of IRS negative assessment, The examinations and observations had discovered that the writing down of inventory was not real. Inventories was only included in the tax return, and therefore,in computation there was lower tax as it was not part of the income statement also.

The team of IRS examination can consult their front line manager and fraud technical advisor for the determination of Civil Fraud Penalties which is about seventy five percent of the owned tax. It is an attribute of fraud that is charged on organization. There will also be interest charges for the recovering of penalties. CEO should include following:

Developing an effective whistleblower program for promotion.

Separation of functions of accounting from the staff for performing staff.

Right culture must be created

Revenues must be matched with cash flows.

There must be no tolerance of fraud at any cost and at any level.

Evaluation for the movements in assets and liabilities

The training programs and education must be continued.

These internal controls are very critical and very crucial because it is the joint responsibility of CEO and also the CFO, to evaluate the presentations of financial statements. Before Auditors and the Board of Directors these financial statements are signed and checked by the CEO and CFO. Therefore, it is recommended that CFO and CEO must practice the internal control practices of accounting in order to avoid the frauds in the financial statements.

Answer 2.

It is clear from the examination of IRS team that inventory is written down by ten percent over the period of three years. This leads to civil fraud penalty that will be approximately seventy five percent tax penalty along with interest can also be imposed. The team of IRS can consult the front line manager and advisors for determining tax penalty imposed on the organization. Moreover, criminal hearing in the court can also be referred. CFO and CEO will be liable for such prosecution and there will be no discrepancies would ...