Auditing Question 2022

The case is Pwc’s $229m sttelement in the lawsuit brought by the shareholders of audit client tyco in 2007” and i want just the answer of question 5 and 6 please.

Auditing

Table of Contents
Question 5........................................................................................................................................3
Question 6........................................................................................................................................4
References........................................................................................................................................6

QUESTION 5
In the given case, Tyco International Ltd (Defendant), made some misrepresentation, which
assist to the adverse judgment and awarding to the damages or liability. With this aspect, some of
the false representation made by company is as follows –
 Company would realize its profit goals only by hidden acquisition.
 Stock of the company hold by individual sold more than $100, 000, 0000 to the company.
 Management of Tyco Company made significant payments to the internal, consisting of $
20,000,000 to a single director and his assistance for advancing the interest of company
(Tyco International Ltd. Securities Litigation 2013).
In addition to the above misrepresentation, it further asserts that external norms and regulation
changes required TYCO to terminate its apparently hostile revenue recognition procedures and
recognize the proceeds from security contract only at the time of amount received. Further, Tyco
purportedly knew about the negative financial impact of the norms changes by Securities and
Exchange Commission that would be around $1,000,000,000. Despite of all the facts, Tyco
Company did not disclose all financial negative impact till partially disclosures were made in
October 2001. Since, the defendant very late to declared portion of above mentioned material
facts among October 2001 to January 2002, the stock of Tyco fell by exceeding forty percent.
In addition to the above aspect, In the district court of United States, the company filed and
declares that Tyco company provide several positive statement with respect to the capability of
company to conduct an providing of stock for its subsidiary company CIT, which were wrong
and deceptive (Reid, & Youngman, 2017). The company fails to disclose the material aspect

regarding that it would not capable to complete this offering. It assist in stock of the company
rise falsely during class period, resulting applicant and other member of the class to buy or sell
such securities at rates slanted by conduct of Tyco company. Moreover, during the class period
company also unsuccessful to disclose practices by Tyco of implementing in related party
transaction with its directors or officers (Carrigan, & Alex, 2015). With this aspect, company
provide interest free loan to its workers. Tyco also buy Florida home from director, and use their
earnings for payment of domestic item of its executive. All the above facts are not disclosed by
Tyco, which assist to the negative judgment and giving damages.
QUESTION 6
In the present era, it is required for auditor to confirm that they are running high quality and
effective audit of financial statement of company. For this, it is recommended that auditor should
maintain high degree of independence, it is considered as major aspect of financial market. It is
required for auditor to assess objectively whether the disclosure made by company is true about
their monetary activities (Thanos, 2015). Since, this objective is threatened by long term
partnerships among company and auditors; therefore it is recommended that auditor should
consider intermediacy threat before accepting any audit assignment. Along with above aspect,
rotation of the auditor is also required in a timely manner. For enhancement of audit strategy and
audit program, auditor should implement good leadership technique and culture in a firm. They
should ensure that all staff has appropriate time and resources so that they can carry their work in
an effective manner and resolve any issues (ACCA Think Ahead 2019). They should also
identify data of consistency on principle based decision. Moreover, establishment and
compliance of code of conduct should be mandatory for all members of audit committee and in

case of non-compliance of code of conduct; appropriate action should be taken against staff
(Fairchild, Gwilliam, & Marnet, 2019). Moreover, auditor should also accept assignment from
only those companies that have high ethical principles and before acceptance; they find
information about background of company. For enhancement of quality of audit, they should
provide education and training, and give more emphasis on moral, independence, and ethical
aspect (Kusumaningtias, Ludigdo, Irianto, & Mulawarman, 2016). The manner of application of
professional skepticism, objectivity, and professional judgment should also explain to the staff.
Moreover, quality control division should also be established by auditor. With this aspect,
auditor should develop regulations framework regarding auditing and accounting along with
market specific framework. For high risk engagement, they should perform engagement quality
control program. Throughout the audit period, it is required that auditory should ensures that
members of engagement team carry their activity according to the audit approach, so that they
can focus on aspects of significant risk and audit execution. Thus, all above procedure assist in
prevention of recurrence of scandal and enhancement of audit strategy and program.

REFERENCES
Books and Journals
Carrigan, M. D., & Alex, T. C. (2015). Recovery from ethical lapses in American business:
TYCO. International Journal of Arts & Sciences, 8(5), 529.
Fairchild, R., Gwilliam, D., & Marnet, O. (2019). Audit within the corporate governance
paradigm: a cornerstone built on shifting sand?. British Journal of Management, 30(1), 90-
105.
Kusumaningtias, R., Ludigdo, U., Irianto, G., & Mulawarman, A. D. (2016). Rethinking of
corporate governance. Procedia-Social and Behavioral Sciences, 219, 455-464.
Reid, C. D., & Youngman, J. F. (2017). New audit partner identification rules may offer
opportunities and benefits. Business Horizons, 60(4), 507-518.
Thanos, L. M. (2015). Tyco International Ltd. Case Study: The Implications of Unethical
Behavior. Academic Leadership Journal in Student Research, 3(1), 7.
Online
ACCA Think Ahead. (2019).Retrieved from <https://www.accaglobal.com/gb/en.html>
Tyco International Ltd. Securities Litigation. (2013). Retrieved
from<http://securities.stanford.edu/filings-case.html?id=102326>