Auditing Case Study Example | Topics and Well Written Essays - 1500 words

Auditing - Case Study Example referable to reluctance of tone of Societe Generale, the family had to face a loss of almost $7.2 zillion in 2008. It is in this context that Societe Generale get outd higher concentration on the front office activities and there was less consideration towards choke off office performances. As a consequence, there was imbalance between the control of front office and jeopardize office functions (Beasley, M. S. & Et. Al., How a Low Risk Trading Caused a $7.2 billion personnel casualty). Due to this reason, Societe Generale was incompetent to develop acute inspections essential for controlling the roles and responsibilities of employees. From the case study, it brush off be observed that like an other(prenominal) organizations, Societe Generale had also become quite determined about drumming up its market worth. Thus, it did not provide much attention towards the traders and its responsibilities for managing the risks, while it rendered high signif icance for financial organizations in order to maintain favorableness (Wartzman, Executives Are Wrong to Devalue Values). According to Canadian Auditing Standard (CAS), life at the light up outlines the principles of a business unit and administrations obligation to aptitude and beliefs (Hartley, Tips for Cost-Effective CAS Application). Tone at the top is necessary for best(p) financial control in any organization. By judge the tone at the top of Societe Generale it can be characterized that it had certain lacunas of internal control which can be categorized as the reason for huge loss faced by the company. For any organization, the top train administration must be clear regarding the rules of business because different organizations have different risk desires. In Societe Generale the management was unable to apply the rules of business throughout the internal working culture. There is need for better internal management which can scrutinize the activities of all employees s o that any kind of illegal activities can be detected and prevented accordingly (Beasley, M. S. & Et. Al., How a Low Risk Trading Caused a $7.2 billion Loss). Question 3 CAS describes that maltreatments in the financial statements ascend from either fraudulent activities or accidental mistakes (OAS, Canadian Auditing Standards). Fraudulent activity comprises three flavours which are pressures or incentives, opportunity and rationalization. Pressure or incentive is the aspect which influences or tends to give reasons to an individual to conduct fraud. With respect to Jerome Kerviel (one of the traders of Societe Generale), as a trader, the earning of Kerviel was quite low in comparison with other top level traders. He even did not consider himself as a trader due to his low earnings. Thus, his incentive for conducting fraudulent activity was to enhance his reputation within the company and thus increase the bonus amount (Beasley, M. S. & Et. Al., How a Low Risk Trading Caused a $7.2 billion Loss). Hence, he was constrained for gaining more money by undertaking monetary risks. Rationalization is the other aspect in majority of fraud cases. It involves reconciling the behavior of the individual alleged for committing fraudulent activities. after(prenominal) disclosure of the fraudulent activity of Kerviel, his rationalization was to make sure that his superiors were aware regarding his activities. Kerviel had articulated that his superiors