Recession Cause Changes In The Auditing Profession Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1553 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? The financial meltdown of 2007 was a calamity to the world economy. The meltdown initiated a period of severe instability to the global financial system which resulted in the failure of several financials giants and billions of dollars from stimulus packages issued by governments around the world. However, the collapse of the housing market was the epicenter of the financial meltdown. It created a domino effect which in turn shook the economic stability of the United States severely affecting financial markets, banks, corporations, small businesses, and ultimately consumers. Causes of the current financial recession: The financial collapse in 2007 was triggered due to the collapse of the housing market. The housing bubble in the United States started in the mid 90s. (Baker, 2008) In the years prior to the collapse, low interest rates were pushed by the Fed in an effort to increase homeownership in the United States. This led to a rapid and continuous increase in the demand as well as the prices of residential properties. Given the circumstances, Wall Street investment banks grouped the loans and offered them as mortgage backed securities to investors. Mortgage backed securities represented the right to the debt obligation on residential properties. Under the conditions at the time, it was blindly assumed that real estate values would continuously rise and when such is the case, where the value of an asset is assumed to be constantly increasing, the concept of risk associated with that asset diminishes. Therefore, lenders increased their issuance of loans to the general public. Subprime and adju stable rate mortgages, arms, were loans given to less than qualified buyers and their riskiness was almost always ignored. The extension of credit through subprime and adjustable rate mortgages resulted in millions of defaults around the country. The adverse affects of this process were made widely apparent when mortgage backed securities began to collapse as a result of widespread mortgage defaults. As the demand in the housing market was increasing rapidly, construction companies saw the need to accommodate prospective homeowners. This led to a home building frenzy which eventually led to a highly saturated market. Furthermore, when housing sales began diminishing, a large number of newly built homes were left empty and even more were left in progress as construction halted due to unprofitability. It is widely believed by many people that the main causes of this crisis were greed and market failure. However, the governments lack of appropriate policy making also contributed significantly to this crisis. Homes are often the most valuable asset of a family. Thus, it had always been an objective of the government to increase home ownership in the United States. Therefore, in an effort to support people, who otherwise were not worthy candidates for homeownership, the government pushed to lower lending standards. To keep recession away, the Federal Reserve lowered the Federal funds rate 11 times -ÂÂ  from 6.5% in May 2000 to 1.75% in December 2001 -ÂÂ  creating a flood of liquidity in the economy. (Manoj, Oct 2010) Down the road, these policies eventually led to the issuance of subprime and arm loans. Furthermore, later, as the demand for houses decreased, investors were the first to pull out causing another shock to the already stagnant market. (Christie, April 2007) Don’t waste time! Our writers will create an original "Recession Cause Changes In The Auditing Profession Finance Essay" essay for you Create order Did the auditing profession contribute to the financial meltdown? The purpose of auditing is to provide investors as well as other users of financial statements with complete and accurate financial information. This objective is achieved through analyzing and assessing a corporations financial information and issuing a statement based upon the gathered evidence. In achieving this object, it is essential to thoroughly examine a corporations major sources of revenue and their reliability. Furthermore, it is quintessential to determine whether or not a corporations business practices are ethical and lawful. Failure to follow these procedures can also be looked upon as a failure on the part of auditors to perform their job correctly. Therefore, taking into account the purpose of auditing, it is not farfetched to say that the auditing profession did indeed contribute to the financial meltdown, because of its failure to detect the highly risky business practices of many banks and corporations as well as failing to catch the material misstatements on th eir financial statements. Furthermore, during the financial crisis, auditors were placed under a lot of scrutiny by people for failing to perform their jobs correctly. For example, an audit of a mortgage company should have began with looking at their products and services, speaking to brokers and underwriters in detail, checking the creditworthiness of borrowers, examining all related paperwork, and assessing the risk of recovering the loans. An in depth analysis of the business process of such companies should have alerted auditors about the red flags of a possible failure. In many instances, lenders were practicing predatory lending, in which consumers were mislead into signing contracts of which they knew not the details of. In consistency with the objectives of auditing, it was the responsibility of auditors to discover and report such unethical acts in their reports. However, hundreds of firms continued to practice this method of lending so that they may sell the loans t o banks on Wall Street. The lack of specialized auditors for the financial industry was also another reason for the failure to detect the misstatements on financial reports. Due to the fact that many banks were performing operations with risky and highly complex financial tools such as derivatives, it was difficult for auditors to detect fraud and report accurately on these operations. Fannie Mae paid Deloitte $49.3 million in fees in 2007. The firm was hired by Fannie Mae in 2005 because its predecessor KPMG missed accounting errors that cost the housing finance company $9 billion in previously reported profit. (Berr, Sept 2008) The necessity for diligent auditors to perform their work with greater accuracy was evident in the years before the financial collapse. Shareholders lost large percentages of their investments and suffered greatly; it could have been possible for these shareholders investment to be safer if auditors would have been able to spot red flags related to the c ollapse. Will the recession cause changes in the auditing profession? The failure of several major banks, insurance companies, and mortgage companies, among others during this recession has left a lasting impression on the auditing profession. Due to the failure of many auditors to detect fraud and material misstatements on the financial statements of many firms, it is more than likely that the auditing profession will have to undergo more stringent policies and procedures. There is no doubt that stricter policies must be implemented to prevent any future financial crises. Enforcing auditors to focus more on governance as part of their audit would improve the audits effectiveness because it would allow auditors to gain insight on the activities of the board of directors as well as any relevant committees. Furthermore, this will also give insight on the different employee positions and what their rights and responsibilities are. By focusing on governance, auditors will also get a better understanding of the firms environment and be able to determin e the nature of the controls as well as that of the personnel. In addition, implementation of stringent guidelines for internal auditors would significantly reduce the risk of fraud and material misstatements. It would allow for a more ethical business environment because internal auditors would be present throughout the fiscal year and would be able to provide the board of directors with thorough assessments. An important change required in the auditing profession is to make the guidelines on when to use and not to use auditing specialists. In recent years, during the peak of the financial crisis, many auditors failed to detect risks associated with complex financial instruments used by corporations. Requiring the use of competent and diligent audit specialist will ensure the quality of the audit performed. On the other side of the spectrum, however, one can also argue that the blame for the financial crisis solely lies upon auditors. Auditors jobs are not to predict the f uture but instead their job is to make sure that corporations have provided reliable information on their financial statements. (ACCA, Oct 2010) Conclusion The financial crisis of 2007 was one of the worst economic disasters since the Great Depression. In the turmoil, hundreds of banks defaulted; financial giants, such as: Merryl Lynch, Lehman Brothers, and Bear Stearns went bankrupt or were bought out. The housing and mortgage crisis played out to be the originator of the domino affect which resulted in severe calamity across the financial world. Even with billions of dollars worth of government funding, many toxic assets were still left untouched and on the books of lenders. The auditing profession contributed to the financial crisis through a lack of following the proper procedures and failing to detect the risks that were present in these firms. It is up to the auditor to issue an opinion on the financial statements of firms and one could argue that the auditors failed to give an appropriate opinion. More stringent rules and regulations will help auditors be able to perform their jobs with greater competence. In the aftermath of t he financial crisis, the global economy has still not fully recovered. Furthermore, many economists believe that a double dip recession could be headed our way. Enforcing stricter auditing policies would definitely help mitigate possible threats to our financial stability and to our economy.

The Fight Over Assisted Suicide - 1746 Words

Over the last thirty years the fight over assisted suicide has earned a spot in the national spotlight, for both positive and negative reasons depending on your stance on the issue. There have been challenges made based off the constitution, the right to privacy and moral reasons for both sides. While there have been many notable persons of interest during this time some have helped the cause as others have hindered progress. There have been attempts to challenge physician assisted suicide based off the Fourteenth amendment of the constitution and the Due Process Clause. Those in favor have argued that in not allowing people access to physician assisted suicide is a violation of the Due Process Clause which was heard during the case of Cruzan v. Director, Missouri Department of Health in which the Supreme Court ruled it was the patients right to refuse medical treatment, even if refusal would lead to death (Cruzan v. Director, MHD). The Supreme Court also heard the case of Washington v. Glucksberg in 1997 during which time there were four physicians arguing that Washington’s assisted suicide ban was unconstitutional because it violated the Fourteenth Amendments Due Process Clause by placing undue burden of the liberty. The case was being arguing on behalf of four terminally ill patients. It was ruled by the Supreme Court at that time that assisted suicide is not a â€Å"right† under the fund amental liberties of the amendment (Washington v. Glucksberg). The Supreme Court alsoShow MoreRelatedEssay on Physician Assisted Suicide903 Words   |  4 PagesPhysician assisted suicide/dying (PAD) is it good or bad? 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To What Extent Might the Cash Flow Statement Help to...

To what extent might the cash flow statement help to overcome the traditional limitations of financial statement analysis in evaluating the past performance and predicting the future successes or failures of business organisations? Accounting is the major means of organizing and summarizing information about economic activities. The information which is provided by the accounting practices through financial statement analysis, provides help to decision makers to take decision. There are various forms of Accounting models which is of great help example if the financial statements for an organization is made statements like Balance Sheet, Profit and loss Account etc it helps the organization out to makes its stand in the market†¦show more content†¦This is a disadvantage of Ratio because it has to be depended on other figures when it is individual it represents nothing There are certain standard set which cannot became for organisation now this again deviates from one another for different organisation. Ratio is not calculated on a daily basis it is prepared as and when the income statement and balance sheet is prepared that takes palace annually. MODERN MEHTOD OF ANALYSING: CASH FLOW STATMENT Cash flow is one of the most vital elements in the survival of a business to include CFs in the annual report of the company is a recent concept. 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Analysis Of Alan Patons Cry, The Beloved Country - 962 Words

Nelson Mandela once declared, â€Å"As long as poverty, injustice and gross inequality persist in our world, none of us can truly rest.† Nelson Mandela explains that seeing the injustice and prejudice in society but not doing anything to try and fix it will ultimately not solve the issue of racial division. In the novel, Cry, the Beloved Country, by Alan Paton, a wise man named Msimangu, and Arthur Jarvis, a well-respected activist, are characters that seek an end to the racial divide in the country of South Africa. Msimangu and Arthur Jarvis each uniquely seek an end to division in their country through teaching hope and working for justice. Msimangu teaches Stephen Kumalo about his hope for South Africa because he understands the oppression†¦show more content†¦Msimangu absolutely changes the way that Stephen thinks. He hears Msimangu reading and realizes not only that he has incredible eloquence, but also that he shows benevolence through his words. Stephen describes Msimangu as â€Å"A man whose heart was golden†. His heart and intentions are in the right place. Though Msimangu could not be perfect, he cared and tried to bring as much patience and love as he could. Stephen sees this in him and it makes him want to show more patience and grace to others as Msimangu does. As a result, Stephen finds his sister, Gertrude, who has been living in poverty as a prostitute and has left her son to lead a tragic life. Yet, Stephen finds it in himself to forgive and reconcile with her, bringing both his sister and her son back into the family. Through Msimangu’s teachings, Stephen was influenced to make a d ifference and to show kindness and grace to those in his family and community. Another character that strove to bring justice to South Africa is Arthur Jarvis. Arthur actively seeks an end to the racial divide through his persistent work because he sees the hardship and despises how the natives of South Africa are treated. James Jarvis, Arthur’s father who was not aware of how his son fought for the natives, finds Arthurs writings after he has died: â€Å"We believe in help for the underdog, but we want him to stay under† (Paton 187). Arthur writes about the injustice and inequality in their country. The whiteShow MoreRelatedAnalysis Of Alan Patons Cry The Beloved Country847 Words   |  4 PagesReverend Stephen Kumalo, the protagonist of Alan Paton’s novel Cry, the Beloved Country, lives in the countryside of Ndotsheni. The countryside is in drought, over-farmed, and the land is dying. Despite all this, it is still representative of home and peace to the chara cters in the novel. It is the home of traditions and old trivial rules. However, a consistent theme it brings is young people leaving for the city, and therefore bringing new messages to South Africa as a whole. The novel presentsRead MoreJames Jarvis806 Words   |  4 PagesJames Jarvis In Alan Paton’s Cry, the Beloved Country there is two protagonists, Reverend Stephen Kumalo, and James Jarvis. Both characters play significant roles to the story but James Jarvis’ situation is noteworthy and inspirational. James is an influential, dynamic character because his opinion dramatically changes upon reading his son’s manuscript. A series of events influences James to shift his mindset into the mindset of his son. An analysis on James Jarvis’ changing mindset revealsRead MoreAnalysis Of Orson Scott Card s The Great Pattern 1676 Words   |  7 Pageswhat resonates with the contemporary writer is essential in determining whether the focus of aspiring writers should be imitating Fielding’s ‘writers of antiquity’, embracing the ‘great pattern’, or on more recent works. For the purpose of this analysis I will be considering works written within the last twenty years ‘recent’, whilst analysing what wr iters gain, or lose, from fiction written longer ago. Some themes in literature are forever relevant to the human condition. George Orwell’s Nineteen

Prescription Drug Abuse And Prescription Drugs - 1510 Words

Prescription Drug Abuse Prescription drug abuse is the use of prescription drugs in the incorrect manner, whether it’s taking a larger dose, taking someone else’s drugs, injecting or snorting them, or simply using them to get high. The three types of drugs that are most abused are opioid painkillers, sedatives or anti-anxiety medication and simulants. Opioids are the most commonly used simply because they are easy to obtain. One of the seven deadly sins is pleasure without conscience. The abuse of prescription drugs is a direct reflection of this teaching. People destroy their bodies, life and relationships around them. Too many people are dying and abusing prescription drugs each year; creating informative programs in and out of school†¦show more content†¦Any young person in college or high school has the opportunity of purchasing these drugs illegally from someone who’s just trying to make a little money. They could care less about how it could affect his or her wellbeing. Prescription drug abuse can lead to addiction, over dose or even death. More and more people are dying each day from drug overdoses. The use of the prescription drugs in the wrong manner can result in several different life altering side affects. Between the three main types of prescription drugs used the side affect can range from repertory failure, seizures, brain damage, extreme weight loss or even death. Our bodies were not designed to take these drugs in such a way. The body becomes dependent on the drugs and withdraws cause serious and painful side affects. The brain creates certain chemicals to help us deal with pain whether it’s mental or physical, and the abuse of prescription drug throws everything out of whack. It’s ironic how something that is designed to help us can also destroy us. (Prescription) Once prescription drugs become too hard to find and too expensive for most people they turn to heroin. Why heroin? Heroin is much cheaper and is just as easy to find. It can satisfy one just as the prescription drugs did. Heroin can be smoked or inject, but most teens stick to smoking the drug. The use of heroin has almost doubled because,

2008 Us Economic Recession - 1709 Words

INTRODUCTIONS The Global Financial Crisis of 2008 is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of small and big banks by national governments, and downturns in stock markets around the world. In United States, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer confidence, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European†¦show more content†¦By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. 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This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. Weak andShow MoreRelatedThe Recession Since World War II Essay1228 Words   |  5 PagesThe Great Recession period was between the end of 2007 and the middle of 2009, which makes it the lengthiest recession since World War II. The gross domestic product (GDP) fell 4.3% from its peak in the fourth quarter of 2007 to its trough in the second quarter of 2009, the largest decline in the post-war period. The rate for unemployment was 5 % at the end of 2007 and increased to 9.5% in the middle of 2009 and reached 10 % in October 2009. The credit crunch had many effects on the economy. 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The Sociological Imagination and Understanding Personal...

The Sociological Imagination and understanding personal troubles as social issues: The Sociological Imagination allows us to question â€Å"things† or issues which are common and familiar to us and to find its deeper meaning. With the Sociological Imagination way of thinking, we find reasoning and uncover why many things in society are the way they are. The Sociological Imagination does not attempt to understand the individual and his or her problems alone, but focuses on issues and problems as it affects the greater society. In society, many factors called social structures, influences our behaviour, thinking patterns, reasoning and our logical approach too many challenges. According to Mills â€Å"In order to analyse the effects it is†¦show more content†¦People who commit suicide do not really want to end their lives as many seek the attention and acceptance they so dearly want from society. Thinking along the lines of the Sociological Imagination we need to understand the social forces, or the lack thereof, that drives people to commit suicide . Emile Durkheim discovered that levels of integration into society played a big role with suicide.Show MoreRelatedSociological Imagination By C. Wright Mills969 Words   |  4 Pages C. Wright Mills defined sociological imagination as the awareness of the relationship between personal experience and the wider society. Understanding and being able to exercise the sociological imagination helps us understand the relationship between the individual and society. Mills focuses on the distinction between personal troubles and public issues. Having sociological imagination is critical for individual people and societies at large to understand. It is important that people areRead MoreSociological Imagination Essay865 Words   |  4 PagesFrom The Sociological Imagination by C. Wright Mills addresses a distinction between personal troubles and public issues. Mills uses specific examples like unemployment and societal development. Mills explains the ability to connect the individual pr oblems with societal problems. Throughout the text, we can see how Mills uses the perspective of an individual to explain the perspective of society and vice versa. Using sociological imagination, I will explain how education is influenced by societyRead MoreThe concept of sociological imaginations allows us to get out of ones own judgment zone with700 Words   |  3 PagesThe concept of sociological imaginations allows us to get out of ones own judgment zone with regards to how we think about social problems. C. Wright Mills argument is that we should develop a method or a way of looking at things in the society from the point of view of the person experiencing the sociological phenomenon. In essence, we cannot look at things from ones own moral point of view; we need to look at things from the point of view of the person experiencing it. Mills believes that cannotRead MoreMills on Private Troubles and Public Issues1124 Words   |  4 Pagesa broader understanding of ourselves a nd the world in which we live, one must first understand ‘the sociological imagination’ and all that it entails. Mills describes this idea in terms of ‘private troubles’ and ‘public issues’ which continue to effect the lives of each and every one of us (Mills 1959: 8). While the connections between the two are evident, there are clearly a number of distinctions which determine the success or failure of either an individual or a society. Understanding that historyRead MoreWhat Can We Do? Becoming Part Of The Solution1619 Words   |  7 PagesThe Sociological Imagination is a concept first used by a well-known sociologist, C. Wright Mills, in 1959. In Mills article, The Promise, indicates that, The sociological imagination enables its possessor to understand the larger historical scene in terms of its meaning for the inner life and the external career of a variety of individuals(Mills, 3). Sociological imagination helps individuals to contempla te their own troubles in a deeper level and view their daily routines in an entirelyRead MoreThe Sociological Imagination Essay1065 Words   |  5 PagesPaper Grade: 75 / C The Sociological Imagination The sociological imagination is an idea or a way of thinking that interlocks an individual in a society with the society as a whole. Most people refer to sociology as the study of how people or individuals interact with each other. In order to fully understand sociology and the concept of the sociological imagination as proposed by C. Wright Mills, one has to be able to envision the individual and the society working together to better understandRead MoreThe Sociological Imagination, C. Wright Mills1268 Words   |  6 PagesIn the novel, The Sociological Imagination, C. Wright Mills is trying to present the concept of how an individual’s ability is able to develop reason by using the information surrounding him. Mills explains that the sociological imagination is an important concept because it is what differentiate sociology from other social sciences such as political science or economic. It is the concept that will help people to have a better understanding of our world , to be clear of the connections within societyRead MoreThe Concept Of Sociological Imagination : Connecting History987 Words   |  4 PagesClaudia Rosado Professor Williams Sociology 3 October 2014 The Concept of Sociological Imagination: Connecting History to Biography C. Wright Mills believed that sociological imagination connects history and biography by means of cause and effect. Society and all things surrounding it have a particular interconnection when it comes to change. As a result, one major alteration to everyday society causes human relationships in history to adapt to change. History is altered by man, without human interactionRead MoreSociological Imagination1017 Words   |  5 PagesThe concept of â€Å"sociological imagination† is one that can be explained many different ways. A simple way to think of the sociological imagination is to see it as a way a person thinks, where they know that what they do from day to day in their private lives (like the choices they make), are sometimes influenced by the larger environment in which they live (Mills 1959, 1). What C.W. Mills meant by this concept is that it is the ability to â€Å"understand the larger historical scene in terms of its meaningRead MoreAnalysis of the sociological imagination and its use in sociology.1483 Words   |  6 PagesSociological Imagnation The sociological imagination is the ability to look at the everyday world and understand how it operates in order to make sense of their lives. It is a state of mind, which enables us to think critically about and understand the society in which we live, and our place in that world as individuals and as a whole. C. Wright Mills, first wrote of the concept in 1959. His understanding of it being that it was a quest for sociological understanding involving a form of consciousness