ROLE OF UNCONSCIOUS BIAS IN CPAS AUDIT

Total unweighted marks 120

NAME (no name NO MARK)

a) You should download this template AND the case from this Harvard Education link https://hbsp.harvard.edu/import/781924 immediately and save it locally to assure it is readily available and to avoid any consequences from connectivity issues.

b) Where there is more than one element comprising the marks allocated, the marks are split evenly among the elements.

c) Complete the exam on this template only and submit your response only ONCE in Word format to me by e-mail mps@uwindsor no later than noon December 18, 2020. Please include your name in the file identifier.

d) PLEASE save your work often to avoid losing hours of effort. You are all very familiar with this practice and there are no extensions to the due time and date arising from a students carelessness in this regard

e) This exam is individual work and requires each student avoid all collaboration with any other person, however, feel free to use all materials in Blackboard Learn, all Team materials, all your OWN individidual work, as well as the case and links I provide as reference materials.

f) The exam is two parts. Part 1 is Theory only and copies of both the Independent Auditors Report and Managements Responsibility for Financial Statements for Canadian Tire Corporation (2019) are provided for context for you to answer the questions in Part 1

g) Part 2 is familiar to you from completing the Assignments and Phase 2, 3 with your Team. Your task is to complete both the Appendix and the Executive summary, which are formatted in the same way as the Teams Phase 3 report. Note that this is, however, a task for you to complete individually with no collaboration with any other person.

h) Refer to instructions provided during the course for Preps, Engagements, Assignments as well as Phase 3, in order to complete this exam to meet the requirements of format and content you are now familiar with as

i) If I respond to individual QUERIES regarding the exam it will be in Announcements where the QUERY and my RESPONSE will be posted. I will NOT respond to any QUERIES after midnight Sunday, December 13, 2020.

j) All the best on this final and in your career as a professional CPA.

See the next page for Part 1 material

Part 1: THEORY ONLY total marks 57

ROLE OF UNCONSCIOUS BIAS IN CPAS AUDIT (select no more than 3 relevant sections/subsections to copy/paste)

Above you see an example of Deloittes statement of its audit opinion for Canadian Tire Corporation for 2019 and a formal statement by the two top officers of the entity, the CEO and CFO formally acknowledging the duties of BOD/TCWG with respect to both the preparation and disclosure of the financial statement information AND for establishing and maintaining adequate systems of internal control over financial reporting. Notice that Deloitte assesses the risk of collusion, forgery, intentional omissions, misrepresentations or override of internal control procedures based on information provided by its client, Deloitte does NOT express an opinion regarding the effectiveness of the entitys internal control but does communicate all significant internal control deficiencies to BOD/TCWG. Finally Deloitte reassures the entity Deloitte has complied with all relevant ethical requirements of the profession and has transparently communicated to the client any potential threats to Deloittes exercise of professional skepticism and professional judgment, required by the profession, during the routine audit. In addition Deloitte assures the client it has taken all related safeguards to combat the threat(s)..

In contrast (to the right) the BOD/TCWG (referred to collectively in CAS as Management) formally states full responsibility for the integrity, reliability, and full compliance with GAAP in the preparation and reporting on the financial statements. It also states full responsibility to establish and maintain systems of internal control adequate to assure the information presented meet the criteria of integrity, reliability ,and GAAP compliance.

Complete the table below and answer the following questions based on the information in the table. (30 unweighted marks in total, 5 marks for each item a through f; 27 marks for the table, 3 marks per narrative)

a) Define the term professional skepticism (cite a section/subsection, which is copy/pasted in the table) and explain how bias impairs professional skepticism in the conduct of a routine audit (50 to 100 words)

b) Define the term professional judgment (cite a section/subsection which is copy/pasted in the table) and explain how impairment of professional skepticism impairs professional judgment in the conduct of a routine audit (50 to 100 words)

c) Explain how following the steps of the rational decision model enables the professional CPA to combat threats arising from unrecognized (unconscious) bias during the conduct of a routine audit (50 to 100 words)

d) State the two corporate governance duties of BOD/TCWG and how compliance with these laws will protect against liability lawsuits (civil or criminal) in court. Name the legal protection. (50 to 100 words)

e) State how the two corporate governance duties apply to the professional CPA conducting a routine audit that two elements necessary to provide evidence of compliance in a court of law (50 to 100 words)

f) State the two legal duties specific to the CPA profession in order of importance listed in the Codes and explain how a full compliance with all CPA codes and standards relevant to the conduct of a routine audit creates and maintains trust in the profession to protect collective economic wealth accumulated through cooperative effort by the public. (50 to 100 words)

Section/subsection reference AND search term bias used In CAS with section/subsection citation

Section/subsection reference AND search term(s) bias used in IESBA with section/subsection citation

Section/subsection reference AND search term(s) bias used in CPA Code of Conduct with section/subsection citation

Narrative

Section/subsection reference AND search term skepticism used In CAS with section/subsection citation

Section/subsection reference AND search term(s) skepticism sused in IESBA with section/subsection citation

Section/subsection reference AND search term(s) skepticism used in CPA Code of Conduct with section/subsection citation

Narrative

Section/subsection reference AND search term professional judgment used In CAS with section/subsection citation

Section/subsection reference AND search term(s) professional judgment used in IESBA with section/subsection citation

Section/subsection reference AND search term(s) professional judgment used in CPA Code of Conduct with section/subsection citation

Narrative

Part 2 of the exam total marks 63.

Resources

http://securities.stanford.edu/filings-documents/1056/TC00_02/20151217_r01c_15CV04194.pdf the legal documents filed in a class action against Toshiba

http://businessethicscases.blogspot.com/2017/03/toshiba-abuses-accounting-policy-when.html

accounting opinion

https://www.arnnet.com.au/article/625050/it-stacks-on-toshiba-accounting-scandal-legal-wrangles/

https://www.ktmc.com/blog/toshiba-accounting-scandal-and-lawsuits

Accounting Fraud at Japanese Companies

https://deloitte.wsj.com/cfo/files/2013/03/tone_at_the_top.pdf

https://iaonline.theiia.org/blogs/chambers/2015/when-culture-is-the-culprit-lessons-from-toshiba-hertz-and-fifa

https://www.vanderbilt.edu/internalaudit/internal-control-guide/who-is-responsible.php

https://asia.nikkei.com/Business/Business-trends/How-Toshiba-s-closed-culture-bred-systematic-cover-ups

Whistleblowing Case: Toshiba’s Fraud Scandal

https://www.reuters.com/article/us-toshiba-accounting-exclusive/exclusive-toshiba-auditor-to-split-opinion-on-finances-governance-sources-idUSKBN1AO165

https://www.reuters.com/article/us-toshiba-accounting/toshiba-probe-looking-at-managements-role-in-accounting-scandal-sources-idUSKCN0PJ0T920150709?feedName=technologyNews&feedType=RSS

https://www.jurist.org/commentary/2015/08/bruce-aronson-toshiba-scandal/ opinion on Japanese corporate governance

https://www.cnbc.com/2015/08/18/toshiba-shakes-up-board-after-accounting-scandal.html BOD changes at Toshiba

https://asia.nikkei.com/Business/Toshiba-struggles-to-show-that-it-has-changed-its-ways

https://iaonline.theiia.org/blogs/chambers/2015/when-culture-is-the-culprit-lessons-from-toshiba-hertz-and-fifa blame the culture

https://asia.nikkei.com/Business/Business-trends/How-Toshiba-s-closed-culture-bred-systematic-cover-ups

Whistleblowing Case: Toshiba’s Fraud Scandal

https://www.ktmc.com/blog/toshiba-accounting-scandal-and-lawsuits

Harvard Case Analysis: Toshiba Corporation (total 63)

EXECUTIVE SUMMARY
REFLECTION (6 marks): Having completed the case and read relevant facts provided, in my professional opinion the writer of some of the Resource material expressed bias in the content. This is the content in which the bias of (name it using one of those in the ACCA document in Blackboard learn resources) was present in this Resource (insert the link) article. The most important reason for my judgment is shown and explained in A while the second reason is shown and explained in B.

A) insert a quote after and your explanation (no more than 50 to 100 words)

B) insert a quote after and your explanation (no more than 50 100 words)

In my professional judgment the most important contributor to the CPA/External Auditor failure was (name it and explain no more than 50 to 100 words) (6 marks):

The three weaknesses in order of priority from highest to lowest as a contributor to the successful fraud are: (3 marks):

1.)

2.)

3.)

The most important reasons for establishing the priorities are: (insert the relevant standards from the appendix which match each priority in order of importance) (3 marks):

PRIORITY 1 PRIORITY 2 PRIORITY 3

XXXX XXX XXX

In my opinion between those charged with governance and the external auditor the larger proportion of responsibility for the successful fraud is borne by XXX. (3 marks):

The three reasons for my professional judgement regarding the allocation of responsibility are: (insert a copy/paste of the relevant narratives allocating responsibility from the Appendix that match the first reason for each Priority). (3 marks):

The remainder of this case reports examines each Priority/Weakness in turn to provide a detailed explanation of the responsibility for the fraud and the allocation of responsibility made by each of BOD/TCWG and CPA/External Auditor, and the link to case facts, that explains how harm was caused to stakeholders. Insert the relevant LINKS narratives from the appendix from the Appendix that match each priority and each of the 3 weaknesses in order of most to least important)

Your 3 major headings for the report are consistent in order and content with the titles of the columns in the table. The order below is alphabetical and never should be understood as representing the relevant fact of the case it is simply an alphabetical list. If you have listed fraud then please state the type(s) (misappropriation, misstatement or both) and assure there is at least ONE standard in the table and in your headings relevant to each and, of course the relevant LINKS narrative. That is Priority 1 is the main heading. NAME OF SEARCH TERM is a subheading that states the search term. The content that follows is the LINKS narrative.

Priority 1/Most important weakness + the narratives (allocation and LINKS) relating to weakness 1 in your Appendix

Priority 2/Next most important weakness + the narratives (allocation and LINKS) relating to Weakness 2 in your Appendix

Priority 3/Next most important weakness + the narratives (allocation and LINKS) relating to Weakness 3 in your Appendix

HEADING IS THE NAME OF PRIORITY 1 (EITHER FRAUD or GOVERNANCE or IC) (3 marks):

NAME of SEARCH TERM: Link Narrative 1 between the case fact and the first entry in your Executive summary table Column 1

NAME of SEARCH TERM: Link Narrative 2 between the case fact and the first entry in your Executive summary table Column 1

NAME of SEARCH TERM: Link Narrative 3 between the case fact and the first entry in your Executive summary table Column 1

HEADING IS THE NAME OF PRIORITY 2 (EITHER FRAUD or GOVERNANCE OR IC ) (3 marks):

NAME of SEARCH TERM: Link Narrative 1 between the case fact and the first entry in your Executive summary table Column 2

NAME of SEARCH TERM: Link Narrative 2 between the case fact and the first entry in your Executive summary table Column 2

NAME of SEARCH TERM: Link Narrative 3 between the case fact and the first entry in your Executive summary table Column 2

HEADING IS THE NAME OF PRIORITY 3 (EITHER FRAUD or GOVERNANCE OR IC) (3 marks):

NAME of SEARCH TERM: Link Narrative 1 between the case fact and the first entry in your Executive summary table Column 3

NAME of SEARCH TERM: Link Narrative 2 between the case fact and the first entry in your Executive summary table Column 3

NAME of SEARCH TERM: Link Narrative 3 between the case fact and the first entry in your Executive summary table Column 3

NOTE: If FRAUD is one of the 3 priorities then name the type(s) of fraud and have at least one standard and LINK narrative for each (Misappropriation of assets, or Misrepresentation on F/S if both put the most important one first and explain why it is first)

Case fact 2 with the Code of Ethical Conduct link for the most important governance and/or control activity(ies) omitted in the entity that led to the most important type of fraud in this Case (either Misappropriation of assets or Misrepresentation on financial statements.) either Misappropriation of assets or Misrepresentation on financial statements.)

PRESSURES/INCENTIVES: (3 marks):

Case fact 1 with Allocation of Responsibility link for the most important pressure/incentive in your case that led to the most important type of fraud in this Case (either Misappropriation of assets or Misrepresentation on financial statements.)

Case fact 1 with Allocation of Responsibility link for the most important pressure/incentive in your case that led to the second most important type of fraud in this case (either Misappropriation of assets or Misrepresentation on financial statements.)

CONCLUSION: (3 marks): In my professional judgment and based on the evidence and explanations Ive provided, the burden of responsibility falls primarily on.The three reasons, in order of most to least important and based on the analysis of technical standards are:

REASON 1

REASON 2

REASON 3

APPENDIX FINAL EXAM (24 marks evenly split across 8 items comprising 4 case quotes required and 4 quotes from the links provided for you and narratives. Assure you accurately cite the page, paragraph of the quote, list the source in References (copy/paste the link is fine for the Resources). More important, assure that at least 2 quotes of the total of 8 refer to the CPA/External Auditor.

1. Direct quote(s) from the Case with citation