Corporate Collapses: An Analysis of Auditing Procedures and Ethical Behavior in Harris Scarfe and HIH Insurance

Auditing
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Contents
Executive summary:............................................................................................................4
b. Brief introduction of the two selected corporate collapses:..................................................5
c. Auditor of the companies collapsed:..................................................................................7
d. An analysis of how has the audit procedures contributed to the collapses:.............................8
Mark-to-market accounting.......................................................................................9
e. Comment on the auditor independence and professional and ethical behavior within the cases
discussed......................................................................................................................... 10
f. Improvements that have taken place in the auditing standards and principles since then........11
h. Conclusion:.................................................................................................................. 13
References:...................................................................................................................... 14
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Executive summary:
Corporate scandals and collapses are considered as an incident of insolvency and bankruptcy in
major business enterprises. It includes corporate business and operational scandals, unethical,
alleged and fraudulent behaviour happened by people actions and on behalf of Business
Corporation. False, wrong and misleading accounting and auditing reporting are also included in
business scandals. This business report will include all information about two major corporate
collapses and contribution and behaviour of independent and professional auditor within the
cases will be discussed further. Proper analysis will be made in the relation to analyse auditing
procedures, principles, and standards for corporate auditing improvement. The first aim to this
report is to analyse all fundamental causes of unexpected accounting and corporate failures in
Australia, the second aim is to recognize whether the auditor would be able to improve those
collapses or not.
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b. Brief introduction of the two selected corporate collapses:
Introduction:
1. Harris Scarfe:
Harris Scarfe Limited was the company which was experiencing one of the largest corporate
collapses in Australia with the total debts $265 million. The major reason for this corporate
fraudulent behaviour was negatively affected by accounting frauds and auditing profession in
Australia. For an example, the corporate collapse of HIH insurance in the company, OneTel and
Ansett Australia overall occurred in a short time span in the starting of 2001. The major
declaration of financial collapse depends on accounting information related to decision making
just because of expectation gap. Harris Scarfe was facing difficulties such as Auditing
Committee, Auditing independence and ethics and unethical and illegal liabilities due to
expectation Gap and accounting scandals (Baiardi, 2018).
The major problem was:
1. Management responsibility and external auditory responsibility:
The major problem was considered as management of corporate collapse due to unethical issues
and financial problem in Harris Scarfe in audit department firms. The company was not able to
prepare and direct annually financial report and failed to produce director declaration in true and
fair view.
2. Failure of the Audit committee and Auditory independence:
The company had assisted to make an audit committee to assist the board of director in order to
fulfill all oversight financial responsibilities to make remained an independent management to
review financial information which was failed due to provide all financial information to
shareholders and others.
3. In Australia, it was not required for the ASX listed companies to make proper audit Procedure
Company and follow audit law but it was totally required to disclose all audit requirement and
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