Accouting System

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aot0_R72kBiw

Sept. 16- A Hong Kong Accounting firm Ernst & Young has been charged to be using "false documents" in Akai Holding Ltd's audit works. Mark Hapgood, the representative of Ernst & Young denied the charge and claimed "it breached its obligations as an auditor" for Akai. However, the Lawyer representing the liquidator of Akai Holding Ltd, Leslie Kosmin, questioned the accounting firm's reliability by indicating alterations of financial documents after they have been dated. Hapgood refused to admit any of the charges and claimed all their report have been reviewed and proven by experts. Judge William stone “said he was surprise by the allegation of fraud”.

Connection

Under the principle of GAAP, financial statements prepared by public-traded businesses must be verified by independent auditors to ensure investors are receiving accurate and correct information about the company. Auditors from Ernst & Young were accused they had failed to verify the fraud in the financial statement of Akai Holding Ltd. For example, Kosmin indicated the lack of proof that Akai’s ownership of lands in Germany and Japan. Land is part of asset and the asset value will significantly increase because lands are usually valuable. This false reflection of asset might mislead investors. Auditors hold a strong responsibility to maintain fairness in the market.
Reflection

I was first surprised that Ernst and Young, one of the biggest accounting firms in the world, was accused of using false documents in their auditing. Later I realize that it is not impossible for such big firm to conduct such unethical act. Money is the biggest motivator for people, even professional ones, to commit a crime. The false use of documents might lead to bankruptcy of thousand investors. It is extremely selfish to consider only one’s benefit but ignore others’. Auditor isn’t just a job; it is a protection that protects investors’ benefit. If this protection is penetrated because of money, investors will less likely to invest any of their money in the market. As a result, the economy shrinks. If each of us has less greed for wealth or fame, will the world be a better place?