Brown, Veena L. Daugherty. Brian E.. & Persellin. Julie S. (2014). Satyam Fraud: A Case Study of India's Enron. Issues in Accounting Education. (29)3:419-442,
Respond to the following case questions:
1. Planning an audit begins with brainstorming. Thinking about the corporate culture of Satyam, what risks can you identify? How should these risks impact the audit of Satyam by PW India? What about the corporate governance and culture of Satyam allowed the fraud to occur?
2. Thinking about PW India What should they have done differently? In answering the question, be sure to address the following issues:
a. With regards to overall audit planning and activities: Was PW India required to follow the auditing standards set forth by the PCAOB for the Satyam audit engagement? Why or why not?
b. With regards to cash and accounts receivable:
i. What are the primary assertions related to cash? What audit procedures are typically performed to test these assertions?
ii. In terms of the confirmation of cash balances, what deficiencies can you identify in terms of the procedures followed in the Satyam engagement? Reference PCAOB standards (you obtained these in Week 1).
iii. What are the primary assertions related to accounts receivable balances?
iv. What is the appropriate response to A/R non-replies? Were these followed?
V. Were the alternative procedures applied in an adequate fashion? Why or why not? what would you have done differently?
c. With regards to internal controls, illegal activities and related parties:
i. What is an auditor's responsibility related to illegal acts?
ii. What procedures should take place when an audit over internal controls indicates that there may be significant deficiencies?
iii. Explain the potential influence of related parties as it relates to this case. Should these relationships have changed the audit plan?
d. PwC is a U.S. CPA firm. Did PwC fulfill its obligations related to quality control over the work performed by its affiliated firms responsible for performing the work on the Satyam engagement?
3. In your opinion, do you think the PCAOB and U.S. punishments were appropriate, too harsh, or light? Defend your viewpoint.
4. Much as the failure of Enron led to the passage of Sarbanes Oxley in the United States, the failure of Satyam led to the passage of the Companies Act 2013 in India. Several summaries of the Act are found below. Comment on the similarities between the Act and SOX.
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Satyam is having several risks identified as per the case. One of the risk is that Mr. Raju is working as the chairman and also he has the control over the operations of the organization. Chairman should be a person who act independently. But as he is overlooking everything, then his work will not be independent.
His brother is the CEO of the organization and this shows that Mr. Raju will not be able to take unbiased decisions due to his brother and this may be a risk in the company.
Currently they have mentioned about the non executive directors who should be present in an organization to act independently.
Impact of risks to the audit
Above risks have an influence to the audit undertaken by PW India. Because auditors were appointed by Mr. Raju and his brother. Therefore, when the auditors are working there is a risk that they might work without thinking about their...