Auditing Theory and Practice: A Case Study of Satyam India Fraud

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student
Name of the University
Authors Note
Course ID

1AUDITING THEORY AND PRACTICE
Table of Contents
Introduction:................................................................................................................ 2
Statement made by G.Medcraft:.................................................................................2
Purpose of Satyam India Audit:...................................................................................3
Degree of satisfying auditing purpose:........................................................................4
Assessment of Satyam Company Management and Auditors ethical behaviour:.......5
Background:................................................................................................................5
Commencement of problems:.....................................................................................5
Role of Management:..................................................................................................5
Unethical conduct:.......................................................................................................6
A case of insider Trading:........................................................................................... 6
False books of accounts:............................................................................................ 7
Lax Board:...................................................................................................................7
Role of Auditors:..........................................................................................................8
Questionable role of audit committee:.........................................................................8
Conclusion:................................................................................................................. 9
Reference List:..........................................................................................................10

2AUDITING THEORY AND PRACTICE
Introduction:
Corporate Governance is associated with endorsing the business fairness,
clearness and accountability. The corporate governance denotes a set of structure,
principles and process though which an organization is governed. The subject of
corporate governance before two decades was considered to be an unidentified
concept (Mishra and Malhotra 2016). The theory came into light in late 80s and in
the early 90s when most of the nation’s corporate governance was surrounded by
dishonourable practices and uncertain problems. The failures of Harris Scarfe, Bond
Corporation and Satyam India have exposed the gaps in auditing that contributed to
the downfall of these companies.
Fraud is considered as the global phenomenon that impacts all the continents
all the sectors a nation. Fraud introduces extensive variety of illegal practices and
unlawful acts encompassing worldwide dishonesty or falsification. Numerous failures
have led to reformation procedure and introduces public accounting information. The
purpose of this report is to determine the ethical behaviour of the auditor and the
managers of Satyam (India). The report will be studying the downfall of Satyam
(India) and would be highlighting the failures of management and audit.
Statement made by G.Medcraft:
Mr Medcraft is the retired Australian securities and Investment securities
commissioner that have stressed on the poor auditing of the company accounts. Mr
Medcraft have cautioned to not have another big auditing scandal by assuring that
the financial statement must be free from material misstatement (Niemi et al. 2016).
Mr Medcraft have expressed his uncertainties regarding the true presentation of
financial information. According to Mr Medcraft statement a major financial crisis in

3AUDITING THEORY AND PRACTICE
the areas of audit could be on the horizon if the level of trust is not maintained in the
financial statement. There are instances where the major auditing firms such as
KPMG, PWC, Deloitte and EY have failed to provide reasonable amount of
assurance that the books of accounts are free from material misstatement. Mr
Medcraft has noticed that there was a lack of scepticism and commonly lacked
challenges.
According to Mr Medcraft over the last six years has conducted number of
high intensity surveillance with more than thousands have been investigated and
imprisoned more than 80 people (Davies and Aston 2017). Mr Medcraft has stated
that a tougher actions against the corporate criminals should be imposed along
instead of imposing civil penalties.
In the statement made by Mr Medcraft there is a grave lack of professionalism
and professional scepticism in the roles and responsibilities of the auditors. Mr
Medcraft has stated that Australian companies are required to escape any form of
major auditing scandals which can stain the profession of audit.
Purpose of Satyam India Audit:
An important component of business is audit and Satyam cannot be
considered an exception to this report. The audit report contains the auditor’s opinion
that are related to financial report (Mohapatra, Graham and Nandialath 2015). As a
result of this an organization is obligatory required to follow a certain set of standards
of auditing and process in the preparation of audit report. The primary purpose of
taking the audit report of Satyam is to offer the users of financial report with the
required information relating to a business financial performance.