Howard Kanter, associate professor in the School of Accountancy & MIS, recently completed a study of securities law violations overseen by the Securities Exchange Commission called “Lessons to learn from the SEC accounting and auditing enforcements” which appeared in the Journal of Accountancy in December 2017.
Associate Professor Howard Kanter
In the article, Kanter analyzes over 1,500 accounting and auditing cases enforced by the SEC from 2008 to 2014. The SEC data he presents includes frequency of different kinds of fraud, penalty totals by fraud and industry and the total assessed fines by profession.
His research proposes five principles for accountants to follow, with the intention they would limit or correct the number of accounting and auditing violations:
- The first principle reiterates the importance that the external audit mission is clearly defined. Internal controls should be properly evaluated in order to prevent false or misleading disclosures.
- The second principle is that full communication is vital between the auditor and client, and that a strong relationship between them would better ensure this.
- Kanter’s third principle is to discourage the “same-as-last-year” approach to auditing. Account changes within the business or changes in laws are relevant to a firm’s operations and must be taken into account.
- The fourth principle directs the auditor to focus on high-risk or “trouble areas” at the expense of time spent on lower-risk areas.
- Kanter’s final principle describes the value of using software that allows for transparent and consistent document sharing between the auditor and client. It would allow for the efficient detection of any errors or inconsistencies in financial data or usage of controls.
Read the article here.