Case 8-2 Parmalat: Europe's Enron
1 . Review the reality in the case, especially the charges in the complaint, and evaluate the auditors' compliance with GAAS. Do you consider the auditor did almost all they could to discover the fraud? Evaluate if auditors worked out due care and the level of professional skepticism to be expected in an audit the size of Parmalat.
Clearly, auditors failed to do the due diligence, thereby indirectly leading to the failing of Parmalat. Italian regulation requires both equally listed and unlisted firms to have a table of lawful auditors as well as external auditors and also needs the reselection of auditors by the table of owners every 36 months and the rotation of auditors after three consecutive selections. A big size company, so on Parmalt, want independent auditor. What is 3rd party auditor? The role of your independent auditor is crucial in protecting traders from deceitful management and must be unsociable to the plank. Meanwhile, the auditor really should not be a friend of the company and really should work completely independently. Parmalt's internal auditors lack of the independent. They generally controlled by Tanzi family. The auditor also lack of professional prudence of auditing. They provide the financial reports and profits statement can be irresponsibility. Based upon this situation, recommend let the inner control accountable for administering specialist and business board, once find big problems report to them at once. Auditors has to be independent and possess the corresponding expertise, such several financial specialists. Audit committee must pay much more attention on evaluation venture risk examination and value CEO and CFO's task investigation. Stringent auditors' rotated and balanced control is very essential. Obvious the function of an auditor. The auditor must accountable for merging accounting report forms.
2 . Consider the fraudulence triangle in Chapter 5. Categorize the various activities and decisions simply by Parmalat and its top management into one...