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I'll proceed to analycal technique 2

we believe that this company

fraudulent accouting practices


revenue recognition falsely recognize revenue -IAS 18
factoring books showed accounts receivable factored on non-current basis
korean banks provided fully secured loan

we're going to have a look into auditor of L&H which is Kpmg. KPMG had been repsonsible in auditing the book of L&H from
whereby we also believe that auditor has to be acocuntable for not taken their responsibilities fully for detecting fraud
The detection of fraud in the case came from the public press, various analysts, and the SEC, rather than from the auditors who
looking back to L&H, the fraud was discovered by an The Wall Street Journal in 1999 since the team found the figures of L&H’s
In all the cases, the auditors’ (and company’s) first answer to the accusation of fraud was: everything was in accordance with G
The most common problem was the auditor’s failure to gather sufficient audit evidence.
The SEC also alleged the auditors failed to apply GAAP pronouncements, or applied them incorrectly.
Lack of professional scepticism, over-reliance on inquiry as a form of audit evidence, deficiency in confirming accounts receivab
In conjunction with the cases we studied in last section, L&H’s auditor is an example of the auditors putting their trust too high

Recently, the American accounting profession directly addressed the external auditor’s responsibility for financial statement fra
There is no clear obligation for auditors to detect any kind of fraud that may have occurred. As Heim (2002, p. 60) says: “absolu
The first of the AICPA Statement of Auditing Standards, SAS No. 1, states: The auditor has a responsibility to plan and perform t

KPMG had been repsonsible in auditing the book of L&H from 1991 to 1999, which is about 9 years in total
KPMG approved

did not comply GAAS


auditing the book of L&H from 1991 to 1999, which is about 9 years in total
fully for detecting fraud
ather than from the auditors who are supposed to be the first to detect fraud.
team found the figures of L&H’s financial statements did not make sense any more.
ything was in accordance with GAAP. And although some auditors have agreed to pay fines, they never agreed to any wrongdoing.

y in confirming accounts receivable, failure to recognise related-party transactions and assuming internal controls exist when they may not,
ditors putting their trust too high in the client data. Soon after the fraud story of L&H was discovered by The Wall Street Journal and the res

sibility for financial statement fraud detection in its Statement of Auditing Standards (SAS) No. 82 entitled “Consideration of Fraud in a Fina
Heim (2002, p. 60) says: “absolutely not!” Under SAS No. 82 (§ 12), the auditor’s responsibility relates to the detection of material misstate
ponsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misst

years in total
eed to any wrongdoing.

ontrols exist when they may not, are the main audit problems which the SEC considered.
e Wall Street Journal and the resulting SEC probe decision, KPMG defended themselves by accusing the former top management of L&H of

“Consideration of Fraud in a Financial Statement Audit.” The Statement requires auditors to plan and perform the audit to obtain reasonab
he detection of material misstatements caused by fraud and is not directed to the detection of fraudulent activity per se.
ments are free of material misstatement, whether caused by error or fraud. Because of the nature of audit evidence and the characteristic
mer top management of L&H of lying about the key business structures within the company and giving false information

rm the audit to obtain reasonable assurance that the financial statements are free of material misstatement, whether caused by fraud or e
activity per se.
t evidence and the characteristics of fraud, the auditor is able to obtain reasonable, but not absolute, assurance that material misstatemen
se information

nt, whether caused by fraud or error. SAS No. 82 makes it clear that the auditor’s responsibility for detecting fraud is framed by the concept

rance that material misstatements are detected. The auditor has no responsibility to plan and perform the audit to obtain reasonable assur
g fraud is framed by the concepts of reasonable – not absolute – assurance and materiality and subject to cost/benefit decisions inherent i

audit to obtain reasonable assurance that misstatements, whether caused by errors or fraud, that are not material to the financial stateme
cost/benefit decisions inherent in the audit process. Consequently, our arguments of requirements on auditors in the thesis, from the audi

material to the financial statements are detected.


itors in the thesis, from the auditor perspective, will be limited within the framework of US Generally Accepted Auditing Standards (GAAS).
pted Auditing Standards (GAAS).