@Brad Sanchez haha! Ain't that cool!

@Brad Sanchez this makes sense. in order to find fraud, you must know how to commit it.

🍷 🕶

@Justin Woodall What the professor probably doesn't tell students is that you can whistleblow anonymously and get awarded based on the size of the fraud. You'd be a fool not to report a fraud comparable to that of Enron and possibly get millions of dollars for it

@Justin Woodall It's a huge price to pay, but I'd rather take the 1.1 million and use it to day trade or invest than enable corruption

It's not to an extent.

Spoke like a true CPA

Materially misstated* for additional legal protection

💯

Money talks tho. 😂😂😂

LuisFer , I laugh because a lot of fraud takes place in the bookkeeping that goes undetected in the auditing.

@@mawavoy that's right, auditors don't check the bookkeeping of a company. That's what I mean, people don't even know what accountants even do much less what auditors do or what they're paid to do. People think they're the SEC's private army and that's not the case

@Teringventje lmao u triggered m8?

accounting graduate here As long as audits are done by private business there is conflict of interest You gave us an audit opinion we don't like? well no more paycheck for you we'll find someone else! Thats auditing today bookkeeping IS accounting though, and also tax and audit

@@GG-sp1cq any high school graduate can bookkeep. Accounting is much more than that. I'm also an accounting graduate BTW.

Complexity is the enemy of progress. It's complex on purpose to keep competitors out.

Would you recommend a new graduate to join any of the big 4 in this situation ??

Anik Das Yes. It’s good to have on your resume, gives you a premium when you bounce to industry or public accounting

@@anikdas2792 I would always recommend new graduates to atleast attempt to interview and work for a Big 4 Firm... Especially if you're a glass is half full type of person. Yes, I worked A LOT. Yes, I was thrown under the bus A LOT. Yes, there's a lot of pressure to perform... But I learned a lot about business and how businesses operate, I met a lot of great business leaders and mentors, I met my best friends... and I learned a shitton.

And this is why the audit fees should increase rather than the trend of decline that we are seeing today. The more audit is treated as a commodity and decrease in fees, the decrease in audit quality will become more and more distinct.

Ironically true

problem is in the conflict of interest. An auditor must not be a position to legally "protect their clients" and instead, it should be a truely independent audit, and the client shouldn't have any leverage over the auditor so that the auditing firm can come up with the facts as is, without having to think about losing a client or potential future losses. I think the whole model needs to be revised.

An auditor responsibility is to give reasonable assurance that the financial statements are free of material misstatements whether due to fraud or error.

Andre Winston Powell the public wants absolute assurance, and has a tendency to blame the auditors whenever something goes wrong.

reasonable assurance

I can understand

Making things seem more complex than they actually are is the core of their trade.

And if they remain clueless then another Enron is inevitable

Most of the public dont really care

crashweaverda just as they wouldn’t know a supply and demand graph if it hit them in the head.

@Abraham C She quit and became a commercial real estate agent. We were lucky to be able to get out. She has a friend in the big four that is miserable....She said they only hire young people so they can suck the life out of them.

@@PappaMustafa ah, an unattractive and dull woman. The type that willingly joins the field. Now a real estate agent. The same old same

@@joehopkins3684 You shouldn't talk about your mom like that joe. Don't express your sad mommy issues on this platform. Its not a good look for you. Keep your head up. One day you'll grow up. Ill pray for you.

King Khan joe mama

@@joehopkins3684 Don't tell us about ur Poor Mom no-one wants to hear it Poor Joe😶.

Conflict of interest

Haha

UKposts ended this problem.

R S fox news is pretty popular

Yup and UKposts has joined the gang. Algorithms and human intervention prioritize certain videos. Other videos are hidden even if you type in the EXACT name of the video UNLESS you put it in quotes, which nobody does. Basically shadow banning.

Not to mention partners throw an intern, 2 first year staffs and a senior to perform the audits lol. Just ocassionally a manager or partner will show up to check the progress made & make sure work will be done by the deadline

Unfortunately, Audit Firm size remain the proxy to measure audit quality, Big4 associate with high audit quality

@@ThePorschefan exactly bro, I work at a big 4 company and my god what you are saying is true.

It is not the auditors role to detect fraud, it is the board of directors of audited client

@@Samibarihussain auditors have fraud procedures, and they are supposed audit controls that are designed to catch errors included fraud.

XplusX12345678 not really, auditors main role is to say whether the financial statements are true and fair. I am an auditor myself and we do not do fraud detection like we don’t go with the aim to see whether there is fraud happening. That’s the role of the board of directors, we do not have any liability if there is fraud going in the company which we are unaware of. If we detect fraud while we do the testings then we have to report it

@@Samibarihussain you're not really an auditor. Or you have been doing nothing but kindergarten Private audits. At least not one subjected to PCAOB regulations. PCAOB AS 2401: "Paragraph .02 of AS 1001, Responsibilities and Functions of the Independent Auditor, states, "The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. [footnote omitted]"1 This section establishes requirements and provides direction relevant to fulfilling that responsibility, as it relates to fraud, in an audit of financial statements" Examples of procedures designed to mitigate fraud risks. "The following are additional examples of audit procedures that might be performed in response to assessed fraud risks relating to fraudulent financial reporting: Revenue recognition. Because revenue recognition is dependent on the particular facts and circumstances, as well as accounting principles and practices that can vary by industry, the auditor ordinarily will develop auditing procedures based on the auditor's understanding of the entity and its environment, including the composition of revenues, specific attributes of the revenue transactions, and unique industry considerations. If there is an identified fraud risk that involves improper revenue recognition, the auditor also may want to consider: Performing substantive analytical procedures relating to revenue using disaggregated data, for example, comparing revenue reported by month and by product line or business segment during the current reporting period with comparable prior periods. Computer-assisted audit techniques may be useful in identifying unusual or unexpected revenue relationships or transactions. Confirming with customers certain relevant contract terms and the absence of side agreements, because the appropriate accounting often is influenced by such terms or agreements.21 For example, acceptance criteria, delivery and payment terms, the absence of future or continuing vendor obligations, the right to return the product, guaranteed resale amounts, and cancellation or refund provisions often are relevant in such circumstances. Inquiring of the entity's sales and marketing personnel or in-house legal counsel regarding sales or shipments near the end of the period and their knowledge of any unusual terms or conditions associated with these transactions. Being physically present at one or more locations at period end to observe goods being shipped or being readied for shipment (or returns awaiting processing) and performing other appropriate sales and inventory cutoff procedures. For those situations for which revenue transactions are electronically initiated, processed, and recorded, testing controls to determine whether they provide assurance that recorded revenue transactions occurred and are properly recorded. Inventory quantities. If there is an identified fraud risk that affects inventory quantities, examining the entity's inventory records may help identify locations or items that require specific attention during or after the physical inventory count. Such a review may lead to a decision to observe inventory counts at certain locations on an unannounced basis (see paragraph .53) or to conduct inventory counts at all locations on the same date. In addition, it may be appropriate for inventory counts to be conducted at or near the end of the reporting period to minimize the risk of inappropriate manipulation during the period between the count and the end of the reporting period."

XplusX12345678 kk cool story bro Cba to read that

It is an auditors job to find material misstatements whether due to fraud or error. Pretty much all of the major accounting scandals had fraud that was obviously material to the financial statements. So yes it is technically an auditors job to find fraud if it is material. The real problem is that auditing is a for profit industry in which most of its staff is young, underpaid, and overworked. Meanwhile, equity partners have a direct financial interest in the profits so quantity matters a lot more than quality.

Auditor job is to find material statement, inform that to client. And based on client's action, auditor makes an opinion. So if the auditor makes unqualified opinion, it means that the financial statement does not have material misstatement.

It's like saying it's not the GP's job to find out if a patient has cancer. The GP may not have the tools but has to refer to the specialists whose job is to find out if the patient has cancer

David Risley there are certain situations that arise that not even an auditor can account for especially in cases of deep collusion amongst multiple companies. If everyone you are gaining information from is lying to you, and are doing an amazing job of presenting fraudulent information, even the best auditor would not be able to find fraud.

As a Big 4 professional - an auditor reviews financial statements, docs, processes, and accounting entries. Then they give their opinion. These are the core responsibilities. Forensic experts look for evidence to be used in court.

Exactly, the audit fees should be paid by public investors instead of audited companies.

The competition is a good thing if the other accounting firms scrutinize between each other. For instance : PWC get a clients from Chevron. They get money from auditing that company. Then, EY can look whether there is a fraud between PWC and Chevron. If EY found that PWC and Chevron made a fraud, EY can report this. PWC and Chevron get fined and the money from the fine sent to EY as reward.

@@chaowang3303 public investors already paying the share of audit fees, dude. It decreases companies' profit, then less retained earning, then less dividen.

You got it right Kevin. Most companies will just fire the Audit company if they cause too much trouble and replace them with a cheaper look the other way firm. The Big 4 are forced to overlook stuff or lose clients. It's just business.

Chao Wang They are paid by the investors. Who do you think owns the companies? 😂

I AGREE WITH YOU 100%!!!

at what level however? Entry, Associate, Senior Associate, Manager, Senior Manager ... ?

You only stay at the big 4 for experience 6 - 12 months . No point of staying.

@@trebledc I have a good salary as an experienced hire, and so far the projects seem decent. I think a couple of years is worth staying

Nah... worked at BDO before PWC. I feel better at PWC tbh even.

@@georgwilhelmfriedrichhegel9602 it is very much impossible to find complexly design frauds given the time constraints as per law and the remuneration provided . Auditor if only obliged to report fraud if he finds some evidence. After exercising reasonable due diligence if auditor is not able to find any evidence of material misstatements then auditor is not responsible.

@@georgwilhelmfriedrichhegel9602 no one can be 100% certain about any fraud. Its too much to cover

Under what law? The ones that other auditors created or had an input in? LOL. The goverments already assess tax, throw audit under it as well.

@@yashpandya6178 I can tell you have never worked on audit. It is not our duty to detect fraud, that's a separate service that the company has to pay for (yes, the very company who you are auditing, is the one hiring and paying you) Clients don't hire you so you can spot frauds on them, they hire you so banks can rely on that information to calculate loans, shareholders can rely on the numbers to value the company & bankers can rely on the numbers for M&A & IPO's Aslo, the amount of resources needed to go deep into the numbers & detect fraud is too much, the accounting firm wouldn't be able to work with multiple clients and make money as they would be stuck 3-6 months with a client instead of 2-3 weeks in a normal audit, and audit firms are in business to make money, not to serve as "police"

@@ThePorschefan finally some sensible person.

Oh! That's the problem, you're still too new to the industry, don't worry after 3-5 years of experience you'll understand it from a business point of view and not just as a student/entry level employee

@@ThePorschefan Not necessarily,if you work from a quiet reputed firm or Big 4 you can learn this in 1 or 2 years of Articles...

@@yashpandya6178 Have you carried on any listed company Audit or be a Part of it? Do you know how a proper audit is designed? Do you even know SA's exist in the field of Auditing? Do you even know sophisticated Fraud is very very Hard to detect? So Basically according to your Point of view we need to sit with client for all 365 days and verify their Accounts? Are you kidding ? That's not Audit my dear that is Book Keeping that is done by Accountant or a team that is under the management... We are here just to certify that based on our observation and the Samples which we take We give a reasonable assurance as to that the FS are free from material misstatements... Reliance consolidated Turnover is 6 lakhs 50 thousand crores what do you expect us do ? Open and watch every entry passed in their Accounting Software ? Do you know that these listed companies need to conduct Board meetings at the year end ? And what is the time available for an Auditor to verify the Books and certify the FS before that is given for approval in Board meeting... Speak with some sense it is not Auditors are left just intact we have seperate Laws to guide our Professional Ethics and coupled with companies Act we are liable for damages caused to Shareholders if we are negligent in performing our duties....

Firms need to be up front with the time and cost commitment. There is a reason why companies would request an audit 2 weeks before a board meeting.

Not even that, they operate several different legal entities in a single geography or country. This allows them to continue their work even one of the entity has been compromised or is under scrutiny.

@@anshuranjan32 Yeah, they even compete against each other for clients. I worked for KPMG in my hometown and we had a client two states away, KPMG had an office in the client's city and I asked "why they don't provide staff for the audit or do the audit themselves instead of us going with only 2 people with a low budget for travel?" Partner told me that bc then the other firm would get to bill the client or at the very least he would have to share the fees with the partner in the other city lol

There is significant cooperation amounts the network though, as well as global and regional leadership.

the term is a "Chinese wall"

Yes that church-state division that is so clearly held in the US 😂

@@ALittleMessi Honestly it's held too well. It's so well held in the US that now teachers are filling the void that would have been filled with religion with communist ideologies like critical race theory.

You must be new here -Ma Bell

The primary reason fraud still occurs is because audit isn't designed to detect fraud. If you don't know that I question if you were big 4 at all

@@ALittleMessi You're focus is on the trees and not the forest. The reason fraud occurs is due to how accounting firms are structured to operate globally. They are not incentivized to demonstrate cutting edge detection to boards and shareholders because profitability is what the latter two care most about. Governance is important but not at the expense of the stock/revenues tanking and expenses skyrocketing. Accounting firms have to walk this tight rope to keep all three stakeholders (shareholders, board, management) happy and doing so (aided by legalese) without gaining a reputation for 'rocking the boat' that could undoubtedly impact the bottom line of their consulting practice, which could comprise 50% of total revenue. If accounting firms were obligated to focus strictly on accounting/auditing they would then be forced to demonstrate value to stakeholders to stay competitive. On the flip side, boards should be prevented from cozying up to their auditors so that they too can be held accountable for their performance by shareholders. At the end of the day, an efficient market demands transparent and accurate financial insight from companies. If regulatory rules aren't standing up a structure that leads to this outcome, fraud is incentived.

@@sishaq12 the free market solves these issues

No. The primary reason why fraud still occurs is because the company being audited doesn't have proper controls, measures and deterences to prevent their employees committing fraud. It is NOT an auditors job to prevent fraud. It is the responsibility of company management and corporate governance. If you were an employee at a Big 4 firm (highly suspect because of your lack of knowledge) you have done a poor job in reducing the expectation gap between the public and auditors.

@@semi-skimmedmilk4480 ever heard of the phrase 'checks and balances'? Come out of the trees so you can see the forest.

@@kingston163 So, basically if you read IAS (International Audit Standards) the main objective of audits is for the users to get financial and nonfinancial information that substantially resembles reality. I mean, accounting is really a fiction and a set of rules set by people to standardize information that can be interpreted in very different ways (that is: amounts, notions, ...etc). Now, there's no way possible that a three month audit is going to review every single process or transaction there is, so there's these statistical models and auditing tests that reveal MATERIAL errors (due to fraud or bad maths). Also, there's always a significance level for these tests and omissions do happen. Nevertheless, the design of the internal control procedures that allow for Enron type frauds are management's responsibility and an EXTERNAL auditor can never participate on their design. They can test internal control but due to restraints on scope can't go deep enough to FORM AN OPINION (in the accounting sense of the term). For Forensic accounting look no further than what KPMG did with Wirecard. Stakeholders got reasonably angry because of the shadyness of EY's auditing and demanded answers. Wirecard hired KPMG to make a forensic review of an specific issue: Wirecard's subsidiaries and affiliates in Asia that were billing the parent for some shady services. You see? You've got an specific issue and scope and your objective is to find either fraud or error. You know where to look at. I went all in because it's Saturday morning and have barely anything to do, hoped it helped.

@@kingston163 there's multicountry audits. Here in Mexico big 4 do the Mexican and, most of the times, also the regional part of transnational companies' audits. Year long audits do exist but are extremely expensive, generally only for big financial institutions. I mean, there's a limited amount of qualified CPAs in the world. There's not just money constraints but also educational system constraints and that can't be put on auditing firms. In general terms the cost of regulation can never be greater than its benefit. We've got a big challenge upon us as a society to find solutions for these dilemmas.

Why EY?

Australia also has ASIC reviews

Muhamad Naufal Congrats

Congratulations

It's not a bad thing, I've worked 1yr in the big 4 and I'm already depressed and want to resign

@crazy horse dance - Yes he should leave only once he's gained some experience at least on paper. Having a Big 4 on your resume helps in the future. It's upto him as to how to take his career further by learning in small to mid size companies.

Economics in Action , seems more testy than tasty! Just saying.

You're right. But on your last point - the basis of the financial statements is typically going concern. If the business is not a going concern, but files statements as though it is, they are materially misstated. So the auditor must verify whether they are a going concern.

Your biggest mistake is aiming for audit. You have been brainwashed by your curriculum's big4 kool-aid

Audit should be conducted by government agencies. But who would pay for it. That is the tricky part. Tax payers would suffer. I think establishment of big 4 itself was a shortcut solution which caused an issue till now.

@@editg121 Nah, governments would be worse. Fewer heads would roll and fraud would be less likely to be discovered. Take a look at how long it takes to build a highway.

When bank audits could be alloted independently then why not the audits under various statues.audit requires complete independence so that appropriate opinion is issued.all audits should be allotted by the authorities under specific statues wherein a portal could be developed and the client should be required to deposit the audit fees before hand.

Are you in final or inter??

Reasonable Assurance*

@@abhishekrajpurohit7762 correct bro sorry for typo. iam inter student

@@shivamshahorignal Even I'm in inter bro

@@RichardCatalanoNY In many cases reasonable assurance isn't being given due to budget and manpower constraints imposed by the big 4 in order to keep their audits profitable. The incentive structure is also running the wrong way where. Public companies want to pay as little as possible for an audit; and want auditors to do the minimum amount of digging to get an unqualified opinion.

@KR I mean they literally teach you this day 1 of audit class. Very first chapter in the book. Only issue is normal people know nothing about it and just scream when a scandal happens

what fraud?

Well, the ppl who audit that companies don’t have deep knowledge about financial engineering, fancy financial instruments, and sometimes all information needed to give a trustful report. And the interest conflict between consulting and audit speaks louder when you catch something wrong. They neeed to be break up: audit or consulting, not both.

Albuquerque68390 the video didn’t even go into the 2007-2008 blowup, much bigger than Enron.

Not the smartest for sure. Old school companies with little to no innovation and you call it smart.

@@editg121 smart as in they're the only ones who know enough to check and do the corrections out of everyone. clearly u aren't smart enough to be one of us

If we keep aside any possibility of malicious intent; still Big 4 partners engage with zillion of audit clients simultaneously with their limited team. Greed is the reason! What does this mean?? An overburdened team/ resources with stricter deadlines are prone to miss critical information, reduced sample size and thus produce inaccurate reports, sometimes fatal.

👌

and which one do they use?

They will most likely use Grant Thornton or BDO..

@@TheRealArjun206 BDO

Very true. Most of the audits result in unqualified reports as long as prior years were all unqualified. Auditing is a bull shit job in my view. Auditors pull the same sample data and as long as it is not blatant material fraud, they’re fine with it. And like you said paying the auditing firms creates a conflict of interest. These firms want to retain your business for audit next year. They have their own portfolio of clients to retain for recurring revenue. It creates a cycle of bs.

James Gordon spotted the commie lol

Dummest comment here

A general auditor's lack of knowledge about a unique asset class or specialized area of the business isn't an excuse. That's why they're allowed to bring in specialists (such as financial specialists) to help them with that part of the audit.

Pwc scam in Kerala who appointed swapana suresh

I would never say they could easily do it, with or without regulation. The size and complexity of clients is insane, and a small company simply doesn't have the manpower to audit that. They could handle maybe 1 client a year if we are talking fortune 500

@@ALittleMessi It's standard practice even for big audit firms to work together with their competitors if they have a very big client and they need expertise in some geographical area in which they don't present currently yet. The same could be with small firms so it's not the problem of size.

At least that way the incentive of all parties would be much better aligned.

@@harveypolanski755 exactly

Never thought of that but sounds like a great idea!

But then the company will just shop for the cheapest insurance provider with the easiest audit methodology

What would the company pay insurance for? There's no insurance company that will insure you for fraud, it's like insurance for a murder case. You've got an idea but forgot there's no product or market or desire from anyone for your proposed "insurance"

You are spot on with your assement. That is generally how it works. Another factor is if the audit company will play ball. If they don't they just get replaced with someone who will. Seen it happen many times!

Audit doesn't detect fraud

Was looking for this comment, also the similarities between Arthur Anderson and Alderson in Mr.Robot

Pretty much, except that E-Corp actually makes revenue, and in overall is much more competent than Enron, lol.

Whose job is Ut to find fraud then???

@@bulalirozani4392 Do you know how unrealistically impossible it is to go over every single piece of information of a multibillion dollar company? Especially when people are actively trying to deceive you? As an auditor, we do our best to provide REASONABLE assurance that the financial statements are fairly and accurately reported. We don't ever guarantee it.

@@bulalirozani4392 it is usually employees and executives colluding when commiting fraud. Most fraud is found by whistle blowers, mainly colleagues informing professionals of misconduct.

What's your favorite cereal?

SOX.

As a person from big 4, I disagree. You can’t audit and consult the same client. You can choose only one. So why separate it?

Research has found no correlation on how these two department affects audit quality and auditor’s independence.

With the the current situation I will advice you look for something that can generate more income to you mate

I used to see forex as a side income but it has proven to be a major source of my income ever since I came across MR Jason, his experience of the forex market is unrivaled.

Congratulations

@Crazy Horse Dance I’m going into it expecting a terrible work environment but the opportunity to learn for 2-3 years, then great exit opportunities

@Fajitahmed Audit! Everyone I’ve talked to in advisory says it’s a lot easier (+ better compensation and no CPA required). Be careful about getting stuck, though. The exit opportunities aren’t as fruitful

They get paid by the representatives of the shareholders, not the management.

This is the problem when you have half baked knowledge..

@@ramnathreddy4508 lol, I have CPA from North America if that matters to you. Auditors can have all the "cover your ass" techniques, all the different verbiage to protect themselves, but at the end of the day, auditors and clients are in the same bed.

@@hussleman2334 Congrats for your CPA,but shouldn't we have some basis to protect ourselves? Even a Sale contract has many terms which protect the Buyers and sellers, Shouldn't we have something like what u said "Cover your Ass" techniques for us? Not every Auditor is Fraud and dependent on client I have seen many Auditor's even Big4 give a Qualified opinion in their Audit report in INDIA..

Dont need a degree to understand this. What a common sense.

Auditor should reduce that to an acceptable level otherwise they should reject the client

thomas aquinas the loss of the bedrock of accounting validity - the paper trail - disappeared years ago. It’s all built on a foundation of sand, silicon actually.

Yeah because they're the only ones that become public

They don't. They should all get out of business with their armies of trash accountants that can't even do basic journal entries and bill naive clients like crazy.

wow, congrats on becoming one of them fraudsters 🤡🤡

@@mynameisazz you dumb. Watch cartoon. Ooga booga

I'm surprised accounting is not automated already. This shit is overdue.