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Audit case studies: lessons from real-world audit failures and success stories

If you’re an auditor, you’ve probably achieved your fair share of success stories – perhaps ...

By Nana Obeng & Tom Edwards & Yasmin Wilks

If you’re an auditor, you’ve probably achieved your fair share of success stories – perhaps you’ve witnessed a few failures too.

As the saying goes, we learn from our mistakes, and audit case studies, both failures and successes serve as valuable insight. Real-life audit examples provide us with lessons on what to do and what to avoid, enabling organisations to improve their audit processes. 

Ready to discover some real-world examples? Here’s our pick of a few high-profile cases…

When things go wrong

(1) enron corporation.

The Enron scandal and the subsequent collapse of the Enron Corporation serves as a stark reminder of audit failure and corporate misconduct. Possibly the most high-profile scandal ever unearthed, the Sarbanes-Oxley Act (SOX) of 2002 was passed as a result of scandals such as this, WorldCom, Tyco, and Global Crossing.

Enron's auditor Arthur Andersen was heavily criticised for failing to detect fraudulent financial reporting. And lots of lessons can be learned from this example.

Firstly, Enron’s case highlights the importance of auditors maintaining independence from the companies they audit to ensure unbiased assessments. But it also reminds us of the importance of whistle-blower protection – where there are safeguards in place, organisations will encourage openness and provide the confidence for individuals discovering financial irregularities to expose them. And Enron finally emphasises how crucial regulatory oversight is in holding auditors accountable and preventing corporate fraud.

(2) Toshiba

We’ve all heard of Toshiba , a renowned multinational conglomerate, manufacturing a wide variety of consumer and business products. Despite the company’s famous success, this chapter of their story is not one of their finest.

In July 2015, Toshiba experienced an internal audit failure that spotlighted the gap between good corporate governance structure and its practical implementation. It led to Toshiba Corp’s president, Hisao Tanaka, and his two predecessors quitting after investigators found that the company had inflated earnings by $1.2 billion between 2009 and 2014.

Regardless of a sound governance structure, the organisation suffered from a massive financial scandal, highlighting the importance of proactive internal auditing to identify and prevent financial irregularities.

(3) Ernst & Young

Even the largest professional services companies are sometimes at the centre of an audit scandal. And in the case of Ernst & Young , these kinds of scenarios serve as a reminder of the importance of a robust auditing process for even the biggest of players.

EY was fined $11.8 million for audit failures in 2016. USA regulator SEC found that EY’s audit team repeatedly failed to detect fraudulent activity for more than four consecutive years. Additionally, it was reported that EY’s team failed to take effective measures in minimising known recurring tax-related problems.

This case emphasises the critical role auditors play in scrutinising high-risk areas and addressing known deficiencies. And underscores the importance of due diligence and thoroughness in audits.

(4) WorldCom

The WorldCom scandal is another example of a colossal audit failure. Arthur Andersen, the same auditor implicated in the Enron scandal, failed to detect a massive accounting fraud at WorldCom.

What can we learn from this tale? Well, attentive auditing is essential, and auditors need to exercise a blend of vigilance and scepticism when assessing financial statements. This example also points to ethical responsibility, underscoring auditors’ moral and ethical duty to report financial irregularities.

Like Enron, WorldCom’s case was instrumental in regulatory reforms, like the Sarbanes-Oxley Act which increased corporate accountability.

Getting it right

(1) apple inc.

Tech giant Apple is widely recognised for its financial transparency and internal controls. Their financial audits consistently reflect strong performance and accountability. Key takeaways from Apple's success include their transparency – Apple publishes detailed financial statements and reports that are easily accessible to the public, building trust with investors and stakeholders. They also have a set of robust internal controls and processes in place, minimising the risk of financial mismanagement or fraud.

The organisation’s MD Tim Cook says , “We do the right thing, even when it’s not easy.”

(2) Microsoft

Microsoft's another great example of a business with transparency and accountability at its core. The tech leader has consistently demonstrated exemplary corporate governance and financial reporting .

Their success highlights several valuable lessons, including the significance of disclosure. Microsoft provides comprehensive financial disclosures, offering investors a clear picture of their financial health. And they’ve also got their finger on the pulse when it comes to  risk management , with practices in place that have been instrumental in ensuring long-term financial stability.

Microsoft carries out consistent and regular financial audits , to maintain trust and transparency with all of their stakeholders.

(3) Johnson & Johnson

Johnson & Johnson's another example of a profound commitment to transparency . The healthcare multinational is renowned for its sense of responsibility when it comes to ethical conduct.

Key takeaways include their strong ethical leadership – an essential asset for fostering a culture of compliance and accountability.

They also boast hardy compliance programs , proving that investing in this area can help detect and prevent financial misconduct. Stakeholder communication is another factor in Johnson & Johnson’s audit success, and open comms are encouraged to build trust and confidence.

What can we learn from all these case studies? The need for thoroughness, vigilance, transparency, ethical leadership, and continual improvement in auditing are essential. They emphasise the importance of not just having a good corporate governance structure, but also ensuring its effective implementation. And by learning from both successes and failures, we can strive to build a corporate environment that prioritises (financial) integrity and compliance with relevant regulatory, legal, and industry standards – and, of course foster trust and prevent costly failures.

Are you  looking for high-calibre talent  with the skills to protect you from audit mishaps?  Let’s chat  about your needs. Or perhaps you’re an  audit professional  looking to help companies grow their audit capabilities? If you’re looking to progress your career and safeguard an exciting, growing business,  get in touch , or check out our  latest roles . 

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Famous Audit Case Studies: Lessons Learned from Noteworthy Audit Failures and Successes

Audit case studies provide valuable insights into the world of auditing, offering lessons that can shape the profession and help auditors navigate complex challenges. In this blog, we delve into some famous audit case studies that have impacted the auditing profession. These case studies demonstrate the importance of thoroughness, professional scepticism, and adherence to auditing standards.

1. The Lehman Brothers Collapse

The collapse of Lehman Brothers in 2008 is a prominent example of an audit failure that had far-reaching consequences. The case highlighted the need for auditors to exercise professional scepticism and thoroughly evaluate companies’ financial statements and disclosures. The failure to identify the risks and irregularities ultimately led to the global financial crisis.

2. The Satyam Scandal

The Satyam scandal in 2009 shook the Indian corporate world. Auditors failed to detect a massive accounting fraud that involved inflating revenues, creating fictitious assets, and manipulating financial statements. This case emphasised the importance of auditors’ independence, scepticism, and the need for robust internal controls within organisations.

3. The WorldCom Fraud

The WorldCom scandal in 2002 revealed one of the largest accounting frauds in history. Auditors failed to identify the manipulation of  financial statements  through improper accounting practices. This case highlighted the significance of auditors’ responsibility to assess and verify financial information and exercise professional judgment diligently.

4. The Olympus Corporation Scandal

The Olympus Corporation scandal in 2011 involved a massive cover-up of losses through fraudulent accounting practices. This case underscored the importance of auditors conducting thorough assessments of an organization’s financial controls, risk management processes, and corporate governance structures.

5. The Waste Management, Inc. Case

In the 1990s, Waste Management, Inc. was involved in a significant accounting scandal. The case brought attention to the manipulation of financial statements and the role auditors play in ensuring accurate financial reporting. It highlighted the need for auditors to challenge management when faced with questionable practices.

Famous audit case studies serve as cautionary tales, illustrating the impact of audit failures and the importance of maintaining the highest professional standards in auditing. These cases remind auditors of the significance of independence, skepticism, and diligence in their work. By learning from these case studies, auditors can enhance their skills, sharpen their professional judgement, and contribute to the integrity and reliability of financial reporting. Continuous education, adherence to auditing standards, and a commitment to ethical conduct are essential for auditors to navigate complex audit environments and safeguard stakeholders’ interests.

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Reader-oriented report writing for internal auditors

Fresenius medical care.

Fresenius Medical Care (FME) is the world's largest integrated provider of products and services for individuals undergoing dialysis because of chronic kidney failure. The Global Internal Audit (GIA) department supports FME’s operations by ensuring that internal controls are effective throughout the organization and business processes are in line with internal and external standards. This is achieved through recommendations published in reports. These reports need to be clear, concise, consistent - and above all readable.

The client's challenge

The Senior Vice President of GIA knew his auditors needed to be better equipped to write clear, concise, sensitive and readable audit reports. He was also looking to reduce the time required to edit and review the reports he received. He needed a level of professional consistency - but the diverse nationalities, background and experience of the auditors was making this a challenge.

Securing consistency in the Global Internal Audit department

We analyzed anonymized examples of FME’s internal audit reports. These examples were integrated into our seminar training material to ensure relevance and promote learning and transfer. After the seminar the learning continued. Anonymized live reports were sent to the trainer who reviewed them for accuracy and appropriacy of language, style and clarity. This coaching went beyond corrections and their reasons, to include hints and reflections on lessons learned. We then encouraged learner autonomy through self-editing and further coaching for those who needed more direct support.

There were 3 key elements in the seminar:

• Tailored training materials incorporating actual examples from FME reports helped the auditors see what could be improved and what could be achieved..
• A trainer with professional auditing credibility ensured the auditors understood why these improvements were necessary and how language patterns could impact their goals.
• Case studies and individual self-correction showed the auditors how to apply the learning in practice and fly solo.

“...We had an excellent trainer who was familiar with the writing of audit reports. The concept has had a longlasting effect on the precision and uniformity of our reports...” Martin Dreher, Senior Vice President  GIA, FME

Since the training, FME has experienced three benefits:

• The GIA team is better able to efficiently and independently write reports tailored to their readers’ needs.
• The Senior Vice President spends less time reviewing and editing reports before they are distributed.
• And ultimately, the department now delivers more consistent, readable reports that add even greater value to FME.

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• How to tackle audit and assurance case study questions
• Study resources
• Advanced Audit and Assurance (AAA)
• Technical articles and topic explainers
• Back to Advanced Audit and Assurance (AAA)
• How to approach Advanced Audit and Assurance

This article provides an insight into the recommended approach for Section A questions in Paper P7, Advanced Audit and Assurance . Paper P7 is one of the final options papers, and, as such, will be a demanding and challenging exam, aiming to test whether candidates have the necessary knowledge, application, skills, and judgement to complete their professional qualification. Using good exam technique and having a sensible approach to questions will do much to help secure a clear pass mark. This is the first of a two-part series on approaching Section A questions. The next article – which will be published in the September 2007 issue of student accountant – will include elements of a typical question and illustrate how these should be approached.

The exam will include two questions in Section A, with a combined mark allocation of between 50 and 70 marks. It is likely that the combined total of the two questions will be towards the higher end of this range.

Both Section A questions will be case studies. Detailed information will be provided about a business for which the candidate’s firm is providing an audit or assurance service. The aim of the case study question is to place the candidate in a real-world situation, facing the real-world requirements that an audit or assurance provider would have to deal with. The questions will therefore be practical in nature.

Case study requirements

Each case study question will include several separate requirements taken from separate syllabus areas. This mirrors what happens in the real world when, for example, an audit manager planning an assignment needs to consider not only how to plan the work, but also assess the implications of any ethical, practice management, quality control, or current professional issues raised from information provided by the client. At least one of the requirements could be to provide a response to a specific enquiry raised by the client or potential client in the scenario.

The first stage, when attempting a case study question, is to carefully read the requirements and understand exactly what is being asked for. By the time a candidate reaches this final stage in their professional studies it is hoped that they are familiar with the general style of question requirements. However, the wording used is such an important issue that it is worth repeating for the sake of clarity. At the Professional level, requirements are at the highest intellectual level and it is imperative that candidates understand exactly what is being asked.

Generally, requirements ask the candidate to perform an action, as follows:

Candidates should familiarise themselves with exam terminology and tailor their answers accordingly. Taking time to consider the exact wording of the requirement will result in a focused answer which satisfies the question set.

Note that very few marks will be available in Paper P7 for rote-learning and the listing of facts, rules, or pieces of information. Instead, the application of knowledge to the specific scenario provided will score well. For example, a requirement may ask for the  identification and explanation of matters (such as business or financial statement risks). As a general rule, a maximum of one-third of the available marks would be available for identification; the remaining two-thirds would be for the explanation of the matter. It is therefore not possible to pass the question requirement without application to the question scenario.

Professional marks

The ACCA Qualification features a core theme of ‘ethics and professionalism’, and all Professional level exams will contain some marks on this topic. In Paper P7, the professional marks will be allocated between the two Section A questions, with a maximum of five marks being available across the two questions. The requirements will clearly state how many marks are available and which question requirement they relate to.

It is likely that Section A requirements containing professional marks will ask for the answer in a particular format, such as a report or briefing notes. The professional marks will be awarded for the following:

• structure and presentation
• clarity of explanation
• use of language appropriate to the addressee
• use of professional judgement
• discussion of both sides of a debate
• appreciation of relevant current professional issues.

Case study information

Having read the requirements and understood exactly what has been asked for, the next step is to carefully read through the information provided, all the time bearing in mind the specific instructions given in the requirements.

The information provided in the scenario is likely to be both numeric and narrative, and could come from many different sources, such as:

• extracts from financial statements
• information from management systems
• details taken from working papers
• verbal representations from the client or members of the audit/assurance team
• statements from third parties.

The information in the question will need to be carefully read and it is important that sufficient time is spent digesting and understanding the information provided. Candidates who skim read the information and do not take time to stop and think about the issues raised in the scenario are likely to produce a poorly focused answer which fails to identify the main points.

When reading the case study scenario it is important, therefore, to identify the following:

• What is your role? For example, are you the manager responsible for the audit, or responsible for company-wide matters such as ethics or quality control?
• What is the time scale? Are you planning an assignment prior to the client’s year end, or reviewing working papers at the conclusion of the audit?
• What does the company do? Is it involved in manufacturing, a service industry, or financial services? Does the company operate in a highly-regulated industry?
• What is the key relationship in the scenario? Is the company a long standing or potential client? Is this a one-off or a recurring engagement?

Understanding these basic facts will ensure that candidates approach the question requirements from the correct viewpoint.

When reading through the scenario it is useful to highlight or underline important pieces of information. A lot of time can be wasted by continually re-reading the scenario, so thoroughly reading and annotating the question paper should improve time management. Remember, with reading and planning time now being given at the start of the exam, there should be plenty of time to read the entire scenario carefully.

Planning and time allocation

The case study questions will contain at least three discrete requirements. Time must be allocated between the requirements to ensure that each is addressed in sufficient depth. Failing to deal with a requirement obviously reduces the overall mark available for a question, but it also detracts from the quality of the answer as a whole. Remember, within each requirement there will be some relatively easy marks to gain, so by not attempting a requirement these marks are lost.

Is it worthwhile planning the answer? The simple answer is yes, as long as the plan is not too detailed and is then followed. A brief plan of the main points to be covered will keep the focus on the key elements of the requirements, and should avoid digressions into irrelevant matters. A good plan should prioritise the most significant issues. This is important, because if time runs short, key issues will still have been covered. A good plan will also draw out links between different pieces of information provided in the scenario. However, a plan is only worth doing if it enhances the answer. Spending too long on a very detailed plan, resulting in a lack of time to deal with the question requirements in detail, is not a good use of time in the exam. Plans should be very brief, no more than bullet points, and clearly labelled so they can not be confused with the actual answer.

A general comment on time allocation: a common error is to spend too long on the first two questions, leaving very little time for the remaining questions. It is imperative that each question is properly attempted, and that sufficient time is left towards the end of the exam to attempt the final question. Candidates are advised that the quality of the overall script will be reviewed, and students are reminded to attempt the correct number of questions.

Take time to think

This may sound obvious, but it is important to take time to think about the requirements, the scenario, and how to answer the question. Rushing to put pen to paper without sitting back to think an answer through is a frequent mistake in exams. The following are common examples of errors caused by not thinking about the facts in the scenario or the question requirement.

Failing to properly read and understand the question requirements could result in:

• not thinking properly about the actual question requirement and then proceeding to answer the requirement inappropriately. Not answering the question set is a major reason for failure. Linked to this, it is apparent that a question requirement is often only read briefly, and that the candidate then goes on to assume that the requirement is identical to requirements from previous exam questions. This will mean failing to answer the specific question set.
• making comments that belong to a different question requirement is a mistake which comes from not looking at the question requirements in their entirety. It is important to look at how the requirements relate to each other to ensure that an answer is logical and comments made do not refer to the wrong answer requirement.

Failing to read the scenario carefully, or failing to think it through, could result in:

• making inappropriate suggestions, as a result of not thinking clearly and professionally about the relationship between the audit/assurance provider and the client. It is imperative that candidates appreciate that Paper P7 examines not just technical concepts, but also the ability to make commercial and professional comments and recommendations. This is one area where stopping and thinking about the relationships between individuals within the scenario is crucial. For example, if the candidate is given the role of an audit manager or partner, it is important not to defer to more junior members of the team. Equally, inappropriate comments to the client must be avoided. For example, the management of the client company should not be ‘asked if they are corrupt’ or ‘asked to prove their technical ability to prepare accounts’. Clearly, such comments detract heavily from the quality of any answer, but can be avoided by thinking carefully about relationships and how they should be managed.
• making wholly inappropriate practical suggestions. For example, asking, as part of audit evidence, to physically verify an asset that has been sold, or requesting sight of a purchase invoice for an item bought many years ago. Think carefully about requests or recommendations and ask whether the request could actually be carried out.
• seeing a word and assuming it means something, when really it means something entirely different – this is a common mistake and results purely from not thinking before writing an answer. For example, if a scenario includes information about fines or penalties, it is important to think about whether the amount has been paid before the year end, and not to automatically assume, without taking time to think about the facts from the scenario, that a provision would be necessary.
• when performing calculations, it is crucial to think about the figures provided in the scenario and to use the correct figure in the right way. For example, when calculating materiality, make sure that the correct benchmark is used. If calculating the materiality of an asset, the materiality calculation should be based on the balance sheet, rather than on revenue as this is totally inappropriate.

Presenting the answer

It should go without saying that answers should be clearly presented, as this makes marking much easier. In particular, the following points should be noted:

• Use headings and sub-headings to give the answer a logical flow.
• Bullet points are only appropriate when listing facts which require little explanation, which will be rare in Paper P7.
• Illegible handwriting is a major problem for markers. If handwriting is a particular area of concern, leave a blank line between each line of writing, and write more slowly.
• Start each answer on a new page of the answer booklet.

Remember that some requirements contain professional marks, as discussed earlier, and in these requirements the presentation and layout of the answer is particularly important.

This article has focused on the case study questions which will appear in Section A of the Paper P7 exam, but many of the points made could equally apply to the Section B questions. It is hoped that candidates will have already developed good exam technique in order to reach this final stage in their professional exams. However, in every sitting, many relatively easy marks are not gained because of a poor approach to answering questions. It is recommended that candidates practise as many questions as possible in preparation for the exam; bearing in mind the points made in this article while practising questions should improve performance significantly.

Written by a member of the Paper P7 examining team

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Audit Report Toolkit

Tools The IIA Mar 01, 2021

​Toolkit includes: Writing an Audit Report, Keys to Report Writing, and Audit Report Template

• Audit Practice

The Institute of Internal Auditors

Learn more with our other resources, iia global research project reveals embracing technological change and expanding advisory services critical to the profession’s future, sustainability part 3: change management strategies for successful sustainability governance, the institute of internal auditors' annual business meeting to be held july 17/washington dc, designing anti-fraud tests that (actually) work, cae bulletin issue: july 9, 2024, the ai revolution: opportunities and challenges for internal audit to leverage and audit ai, learn about iia programs and partners..

We are continually searching for innovative products and services to enhance our members' ability to meet their rising stakeholder demands. 

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Registrations

Date/Time Date(s) - 23/11/2021 - 25/11/2021 8:00 am - 12:00 pm

About this course:

Course introduction.

Persuasive communication is an essential skill for auditors at all levels, and high-quality audit reports are a key communication tool. By participating in this course, auditors in all sectors and at all levels will learn what goes into an effective audit observation and how to organize reports that meet professional standards, elicit management action, and communicate crucial messages to executives and board-level readers. By honing these skills, they can distinguish themselves in their current positions and prepare themselves for advancement. This is a hands-on course that focuses on the organization and structure of audit reports, and includes case study activities for practicing the basics of audit report writing.

Course Schedule

• Day 1: 08:00 – 12:00
• Day 2: 08:00 – 12:00
• Day 3: 08:00 – 12:00

Course Outline

The Audit-Report Writing Task

• Recognize the criteria for, and importance of, writing audit reports.
• Explain why audit reports are written.
• List the readers of your reports.
• Describe how readers use the reports.
• Describe limitations placed on your reports and on yourself as a report writer.

Components of Audit Observations

• Complete the five components of an audit observation.
• Identify types of criteria.
• Create condition summaries.
• Determine levels of cause.
• Determine levels of effect (or consequence).
• Create recommendations and action plans.
• List the components of audit observations.

Audit Report Structure

• Construct an audit report.
• Evaluate the importance of the various sections included in audit reports.
• Apply one of the four formats to write an audit Observation.
• Distinguish the advantages and disadvantages of different report formats.

Quality of Reporting

• Develop reports that are accurate, objective, clear, concise, constructive, complete, and timely.
• Develop coherence.
• Practice objectivity.
• Ensure sentence clarity.
• Rephrase technical terminology.
• Write with readability and conciseness.

CPE Credits: 12

Level: intermediate, field of study: communication, advance preparation: none, delivery format: online.

Bookings are closed for this event.

The UAE IAA reserves the right to amend the Terms & Conditions at any time without prior notice.

While the UAE Internal Audit Association and its staff make every effort to observe and maintain the schedule of every training course as set forth in the organization’s training schedule, under certain circumstances that are out of our control we might feel obligated to cancel and/or reschedule any training course or event. Under these circumstances, our training department will forward all registrants to the next available schedule for the same course. The individual participant or the sponsoring organization will have the ability to request a different schedule for the same course or a different course within the same calendar year.

Number of Attendees:

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Certificate in Internal Audit Report Writing

On this course, participants gain a deep understanding of the key role played by audit reports in the realm of internal auditing. The course begins by emphasizing the critical importance of the audit report, offering insights into best practice, essential components, IIA standards, and report structure. Subsequent modules focus on improving audit reports, modern audit writing, the strategic use of executive summaries, and enhancing visual appeal and effectiveness through illustrations and figures. Participants gain practical skills in writing actionable observations, understanding their audience, and applying effective checklists while avoiding reporting pitfalls. 

Course Methodology

This course is highly interactive with group discussions, case studies, hands-on practical exercises, and group activities being the core focus.

Course Objectives

By the end of the course, participants will be able to:

• Understand the importance of the audit report as a critical communication tool in internal auditing
• Apply effective reporting checklists to enhance the quality and accuracy of audit reports
• Utilize practical audit observations that focus on future improvements rather than past issues
• Determine when and how to effectively use executive summaries in audit reporting
• Explore new methods for presenting audit reports and promoting the audit function to various stakeholders, including the Audit Committee, the Board, and Senior Management

Target Audience

This course is designed to provide a comprehensive understanding of internal audit reporting and communication, making it suitable for internal auditors, compliance officers, risk managers, and other professionals involved in auditing within organizations.

Target Competencies

• Report Writing
• Writing procedures
• Comprehension
• Stakeholder management
• The importance of the audit report
• Good practices in audit writing
• Essentials of a good internal audit report
• Stages in report writing
• The Institute of Internal Auditors (IAA) standards on internal audit reporting
• The audit report structure
• Reporting bombs - not seen until they explode
• Reporting checklists
• Understand your audience
• Make a “Findings Sandwich”
• The 5 C’s of observations
• Peer review
• Audit reporting
• Major reporting failure
• Writing practical audit observations
• Focus on the future rather than the past
• Passive vs. active style
• The “So what” test
• Techniques / points to keep in mind while drafting the Internal Audit Report
• The 3 to 5 seconds rule
• Alternative procedures
• When and how to use them
• Detailed observations, when do we need them?
• Traditional reports vs. executive summaries
• Writing executive summaries
• Comparing executive summaries
• Style and presentation
• Format, layout and templates
• The psychology of visuals
• Reporting observations through graphs
• New methods for presenting reports (meetings, memos, videos, etc.)
• Follow up on reporting issues
• Reporting to the Audit Committee, the Board and Senior Management
• Flash audit reports
• Reporting consultancy jobs
• The root cause analysis

Meirc Professional Certificate (MPC)

MPC certified courses by Meirc Training & Consulting are designed for those willing to challenge themselves and go the extra distance. Participants who fully attend an MPC course and successfully complete the test on the last day, will receive a Meirc Professional Certificate (MPC), in addition to the one they receive for full attendance. MPC certificates are regionally recognized and can be quite valuable when applying for more senior roles within the organization or outside.

2024 Schedule & Fees

Per participant.

Fees + VAT as applicable

(including coffee breaks and a buffet lunch daily)

Location & Date

Meirc reserves the right to alter dates, content, venue, trainer, and to offer courses in an integrated virtual learning (IVL) format whereby face to face classroom participants and virtual learners participate simultaneously in the same course in an interactive learning experience.

Tax Registration Number: 100239834300003

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Yearend Internal Auditing: Case Study Example

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Audit Case Study: Introduction

Overview of the newly formed xyz company, value of auditing to xyz ltd, advantages of appointing the same auditors, disadvantages of appointing the same auditors, advantages of audit rotation, disadvantages of audit rotation, audit case study: conclusion.

Auditing is the process of examining the financial statements of an organization, correcting errors, and eliminating possible cases of fraud. The auditing process is a core activity that enables a company to control its internal activities in an efficient manner. Through auditing, most companies are able to achieve their business goals and objectives (Wang & Tuttle 2009).

Several critics have risen concerning the auditing process. While some businesspersons find it worthwhile to invest in the auditing exercise, some find the auditing exercise unworthy.

In this case, we have the XYZ Ltd Company; a pharmaceutical manufacturing company that was formed because of the splitting of the parent company, ABC Ltd. XYZ Ltd is the smaller of the two newly formed companies and the previous sales manager of the parent company is the Managing Director.

The managing director does not find it worthwhile for the small company to carry out yearend audits. According to him, yearend auditing is an unnecessary exercise that will only increase the expenses of the company without necessarily adding value to the business.

This paper will give a stringent analysis of the newly formed XYZ Company and determine if indeed there is a need to carry out yearend auditing. The paper will also give a detailed discussion of the pros and cons of appointing the same auditors of the parent company to audit XYZ Ltd.

Lastly the paper will give an overview of the audit rotation exercise, its advantages and disadvantages. From the discussions, the paper will give decisive conclusions and recommendations that would enable the XYZ Company’s managers to make a worthwhile decision concerning the auditing process.

As indicated, XYZ Ltd Company formulated because of the splitting of the parent company. According to the previous descriptions, XYZ Ltd Company is a private limited company that is not legally obliged to have an audit (Hodgdon et al. 2009).

This is because the company Act only obliges state owned companies and public limited companies to have audited financial records, whereas, the smaller companies voluntarily choose to have auditors examining their financial statements. However, although having an audit is not a mandatory requirement for XYZ Ltd, the auditing exercise would add some tangible value to the company.

Detection and prevention of fraud

Fraud is a practice that can make businesses to undergo some massive losses. It is noteworthy that a small company like XYZ has a small operating capital that could diminish drastically if not well managed. Fraud cases such as skimmed payments from customers, cash theft, improper handling of petty cash and misuse of the company’s credit cards are some of the practices that can lead to total failure of a company.

It is quite expensive for a small business like XYZ Ltd to create an internal audit department, however, the company can create a system that checks and controls the financial operations and the company employees. An informal internal audit process would somewhat reduce fraud cases resulting from personal interests (Chi & Huang 2011). It is noteworthy that the parent company would have split due to extreme cases of fraud.

Prevention of fraud through an informal audit exercise would enable the small XYZ Company to prosper and grow into a big multinational company and even surpass the projected turnover of £2.8 million in the first year of trading.

It is important for the company to create a program that would help in monitoring employees and enforce strict rules regarding any employee who is found guilty of committing fraud cases. The establishment of an internal audit would facilitate the above-mentioned practices though a persistent analysis of the company’s operations.

Testing and monitoring of internal controls

An Informal internal audit calls for recurrent analysis of the operations within a company. The habitual analysis enables the company’s operations to occur smoothly, where, the employees are kept on toes to offer the best of services. A small company like XYZ Ltd can employ auditors who would design, modify, and control the internal activities of the company.

Though auditing, the company is able to streamline its activities in a manner that would enable it to achieve its goals and objectives (Holm & Zaman 2012). Essentially, XYZ Ltd is a profit making company that would aim at generating the maximum profits possible.

The auditing exercise would enable the company to keep track of its revenue and expenditure and the gross profits made during a particular financial year. Any form of misappropriation of resources is tracked, where; all the involved stakeholders are made answerable of their actions.

Monitoring the company’s compliance with the company policies

All companies have policies that guide then in their daily operations. In addition to the informal internal exercise, XYZ Ltd Company can employ a formal internal audit policy that works towards ensuring the company eliminates all actions that would expose it to massive losses. A company may have a policy that extends credit to its customers to prevent losses.

An auditing exercise will determine if indeed the company adheres to the policy. Moreover, the auditors will be able to carry out a cost benefit analysis of the credit policy and determine if it is a worthwhile practice. The reports from the auditors will help the decision makers to determine new policies that would work if enforced and identify the old policies to eliminate from the company practices (Deis & Giroux 2006).

An operational audit would examine the financial statements of a business to ensure the business complies with the policies of obtaining maximum efficiency from all business operations.

Monitoring the company’s compliance with the government regulations

The worst thing that can happen to a small business like XYZ Ltd is facing the adverse consequences of failing to adhere to government regulations. An operational audit exercise plays a great role in advising the business managers of all the applicable government regulations (Bon Kim & Yi 2009).

It is though an auditing process that a business would know the legal procedures of tax avoidance. Moreover, the government has strict employment laws that companies ought to follow.

The auditing exercise would advise the management team accordingly on when it should recruit new employees, when to promote or when to fire an incompetent employee. The auditors would advise the management team of the actions that attract fines as well as the procedures to obtain and comply with government regulations.

The exercise of appointing an auditor

The exercise of appointing an auditor may seem very simple, but it is associated with a lot of dilemma. The XYZ Company formed because of the splitting of the parent company.

There is no clear reason as to why the parent company decided to separate the pharmaceutical and optical divisions; however, it would be due to mismanagement reasons. Whatsoever the reason, appointing the same auditors as those of the parent company to audit XYZ Ltd Company is associated with several advantages and disadvantages.

Massive experience and expertise

As indicated, the auditors have audited the financial records for the parent company for the past ten years. This is a clear indication that the auditors did some marvelous work that sustained the growth and expansion of the parent company (Jackson, Moldrich & Roebuck 2010). There is a high probability that the parent company had grown too big such that the managers decided to split it for easy management.

The success of the parent company is attributed to the massive experience and the excellent work of the auditors. Similarly, XYZ Ltd Company can appoint the same experienced auditors to audit their financial records.

Appointing the same auditors would be an assurance that the newly formed company would grow and last for the next 10 years or more. XYZ Ltd Company will greatly benefit from the quality services from the expertise of the auditors.

Affordability and efficiency of the auditing services

It is evident that a small business like XYZ Ltd will find it very expensive to obtain new auditors to audit their financial books (Kaplan & Mauldin 2010). The auditors of the parent company may have some compassion with the small company and charge the company some affordable rates for the auditing exercise.

Moreover, the auditors who are already familiar with the financial records of the parent company will give an effective allocation of the amount set aside for the auditing expense to ensure that the company does not run at a loss.

Smooth flow of activities

Bringing in a new set of auditors would somewhat bring in disruptions. If XYZ Ltd Company appoints the same auditors as the parent company, the auditors will put up with the small company easily.

In fact, maintaining the same auditors would enhance their morale to improve their quality of services in the subsequent audits (David & Thomas 2013). The relationship between the auditors and the company would strengthen, and this would make the auditors to work hard to ensure their auditing work brings in some mutual benefit to all the company stakeholders.

Possibility of recurring previous mistakes

From a business point of view, an esteemed company cannot decide to separate its operations for any good reasons. There is a very high probability that the company decided to do so because it began experiencing some massive losses because of vague auditing processes.

If truly this is the reason behind the splitting of the company, it means that the auditors played a critical role in bringing down the parent company. Therefore appointing the same auditors will pose the way to recurring the previous mistakes. In the end, the XYZ Ltd Company would also face the same problem and it may end up collapsing.

Lack of the point of comparison and evaluation

It is always advisable for companies to evaluate and compare the services offered by a particular company stakeholder. If XYZ Ltd Company uses the same auditors as the parent company, it may not be able to evaluate the efficiency of the services. While the auditors may appear to offer quality services, it would be worthwhile to have a change that would formulate a point of comparison.

Probably, the new auditors would reveal fraud cases that the usual auditors would not depict. In essence, appointing the same auditors as those of the parent company will blindfold the XYZ Company and it may not be able to gauge the quality of the auditing services (Kramer et al. 2011).

Audit rotation

The exercise of changing auditors has often raised eyebrows amongst businesspeople. While some businesspersons regard audit rotation as a worthwhile practice, some of them regard the exercise as unworthy as it only encourages businesses to doubt the competence of auditors. Despite the different perceptions, audit rotation is associated with various advantages and disadvantages.

Increased perfection

It is evident that there is no perfect human being; therefore, a different set of eyes on a company’s financial record would detect an error that the preceding auditors could not detect. In fact, for publicly held companies, audit rotation is done every five years, and private limited companies can employ the same practice to obtain quality audit services.

The exercise helps in identifying and eliminating intentional and non-intentional errors (Daniels & Booker 2011). Companies that embrace audit rotation will be at a safe position, as they would provide clear records of their financial statements to the bank and to the funders.

Decreased fraud and increased impartiality

Some auditors within a given audit firm may collaborate with the financial managers of a given company to “steal” from the company. Audit rotation plays a significant role in ending such cases because not all auditors would comply with such evil deals.

The shortened period of auditing will not allow audit firms to create close relationships with the management, an action that may have a negative impact on the performance of the auditors.

Audit rotation enhances the provision of impartial services by audit firms as they are obligated to rotate the auditors within the firm (Chi et al. 2009). In essence, the audit rotation exercise plays a critical role in increasing impartiality for all the stakeholders of the company.

Disruption of the company’s activities

It is evident that audit rotation, especially if it involves changing the auditing firm would have adverse consequences on the company’s activities. Different audit firms will come up with different advisories to the management team and the company’s activities may be disrupted from one time to another (Bates et al. 2012).

Moreover, audit rotation does not allow the development of a long-term relationship between the company and the auditors, which is very important for the delivery of efficient services.

Destroyed reputation of the company

Some companies have had a tendency of frequently changing the auditing firms. The practice of changing audit firms too often would depict a negative picture of the firm. Investors would shy away from such firms, as they would perceive them as incompetent because they only do “auditor shopping” and expect better results instead of working of their performance.

In essence, audit rotation would bring out misconceptions about a profit making organization like XYZ Ltd Company.

Increased risk of audit failure

It is evident that every time a new audit firm is appointed to carry out the auditing exercise, the firm requires some time to comprehend the company’s books of accounts. The audit firm fully understands the rules of the game of how to audit the firms accounting books when its term is almost over.

The administrative will have to invest time to evaluate the subsequent audit firm and the whole exercise is not only expensive, but it also increases the chances of failure of the auditing exercise by the new audit firm (Daugherty et al. 2013).

From the discussions, it is evident that auditing is a very essential exercise in any organization. Auditing enables companies to have a clear outlay of the company’s activities. Though auditing, a company can easily depict fraud cases and address them accordingly. From the discussions, it is evident that the decision on whether to maintain auditors or to employ an audit rotation depends on their performance.

If, for example, the auditors of the parent company, ABC Ltd Company, were not competent, the newly formed XYZ Ltd Company may need to appoint a new auditor to audit the financial books. Secondly, if the new set of auditors do not display their competence after a couple of years, an audit rotation will be essential (Peecher, Schwartz & Solomon 2011).

In essence, every decision made is associated with advantages and disadvantages. The company managers are obliged to make decisive decisions about the auditing process. There should be strong reasons behind any form of changes in the auditing process.

Both the internal and external auditors have a great role in maintaining efficient and reliable financial reports. The auditors should be in a position to give a detailed explanation of every figure that appears in the financial records.

The directing managers should only take the role of the overseers who should only come in whenever there are suspicions of fraud cases. All scandals relating to the books of accounts are handled in a professional manner without downsizing the involved stakeholders.

Bates, HL, Waldrup, BE, Jaeger, DG & Shea, V 2012, ‘Issues with mandatory audit firm rotation’, Journal of Business and Accounting, vol. 5, no. 1, pp. 70-75.

Bon Kim, J, & Yi, CH 2009, ‘Does auditor designation by the regulatory authority improve audit quality? Evidence from Korea’, Journal of Accounting and Public Policy , vol. 28, no. 3, pp. 207-230.

Chi, W & Huang, H 2011, ‘Discretionary accruals, audit-firm tenure and audit-partner tenure: empirical evidence from Taiwan’, Journal of Contemporary Accounting & Economics , vol. 1, no. 1, pp. 65-92.

Chi, W, Huang, H, Liao, Y, & Xie, H 2009, ‘Mandatory audit partner rotation, audit quality, and market perception: evidence from Taiwan’, Contemporary Accounting Research, vol. 26, no. 2, pp. 359-391.

Daniels, W & Booker, Q 2011, ‘The effects of audit firm rotation on perceived auditor independence and audit quality’, Research in Accounting Regulation , vol. 23, no. 1, pp. 78-82.

Daugherty, B, Dickins, D, Hatfield, R, & Higgs, J 2013, ‘Mandatory audit partner rotation: perceptions of audit quality consequences’, Current Issues in Auditing , vol.7, no.1, pp. 30-35.

David SJ &Thomas, EV 2013, ‘Audit firm rotation and audit quality: evidence from academic research’, Accounting Research Journal , vol. 26, no.1, pp.75-84.

Deis, DR, & Giroux, G 2006, ‘The effect of auditor changes on audit fees, audit hours, and audit quality’, Journal of Accounting and Public Policy , vol. 15, no. 1, pp. 55-76.

Hodgdon, C, Tondkar, RH, Adhikari, A & Harless DW 2009, ‘Compliance with international financial reporting standards and auditor choice: new evidence on the importance of the statutory audit’, The International Journal of Accounting , vol. 44, no.1, pp. 33-55.

Holm, C & Zaman M 2012, ‘Regulating audit quality: restoring trust and legitimacy’, Accounting Forum , vol. 36, no. 1, pp. 51-61.

Jackson, AB, Moldrich, M & Roebuck, P 2010, ‘Mandatory audit firm rotation and audit quality’, Managerial Auditing Journal, vol. 23, no. 5, pp. 420-437.

Kaplan, SE & Mauldin EG 2010, ‘Auditor rotation and the appearance of independence: evidence from non-professional investors’, Journal of Accounting and Public Policy , vol. 27, no. 2, pp. 177–192.

Kramer, ST, Georgakopoulos, G, Sotiropoulos, N & Vasileiou, KZ 2011, ‘Audit firm rotation, audit firm tenure and earnings conservatism’, International Journal of Business and Management, vol. 6, no. 8, pp. 44-57.

Peecher, ME, Schwartz, R & Solomon, R 2011, ‘It is all about audit quality: perspectives on strategic-systems auditing’, Accounting, Organizations and Society , vol. 32, no. 5, pp. 463-485.

Wang, KJ & Tuttle, BM 2009, ‘The impact of auditor rotation on auditor-client negotiation’, Accounting, Organizations and Society , vol. 34, no. 2, pp. 222–243.

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Audit Report, Case Study Example

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You are free to use it as an inspiration or a source for your own work.

What audit risk factors did the auditor identify? How should these risk factors have affected the audit?

In relation to audit risk factors, the auditor tried to utilize specific data manipulation. Castello in this case specifically instructed the creation of new information that would supersede the reality of the actual reports of the company. This way, the report has been placed into risk of being imbalanced therefore portraying wrong financial data that could jeopardize future accounts especially when it comes to detailing the information for future references.

What audit procedures did the auditor apply? What alternative audit procedures should the auditor have applied?

The auditor specifically used the alternative inventory control method so as to create a diversion from the original financial report at the end of the fiscal year hence creating a new description of the company’s performance. Instead of utilizing the Economic Order Quantity (EOQ), the auditor ought to have utilized the Just in Time Inventory, which specifically provides real time adjustments that provide actual on-time reports instead of the past collected data that could be manipulated through time exchange.

What mistakes did the auditor make?

Using the 1992 and 1993 fiscal report for the payables presentation is a fraudulent approach to the case hence making the auditor responsible for providing questionable report that does not mirror the actual situation of the company in the face of the modern industry that it is currently enjoined with.

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Internal Audit Report for a Case Study

• Thread starter sarah sara
• Start date May 11, 2009
• May 11, 2009

Attachments

• CaseStudy.doc 28.5 KB · Views: 672

Re: internal audit case study Hi Sara and welcome to the Cove. I moved your thread to this thread for student questions. I also retitled your thread to accurately describe your subject matter.  

sarah sara said: Hi eveyone, I'm Sara. I'm a new member hoping for your help. I'm a trainee in an internal audit program. I finished my second month. Our teacher gave a case study to write an audit report about. Can anyone help me with it?? The case study is attached Thaaaank you so much Click to expand...

Re: internal audit case study Thank you CarolX… And also thank you very much Mr.Boscoeee..we have to evaluate the internal controls in the department and write it down in a report contains: Interdiction Findings and recommendations Audit opinion This is my first case study ..I feel lost..I feel like I need some directions.. As a beginning I defined the first problem which is that the training for the new employee was not good enough, then there is the credit card problem I think that every one having a credit card is so wrong and also there must be a properly reviewing every month of all the cried card expenses and also I didn’t like the way they approve it (the stamp idea) the third problem is the employee attendance is not accurate I thought maybe they can control it by using an advanced technology such as finger print and hand scan..what do u think?? I’m I doing well so far??how can I expires them with a good formal English?? ..actually English is my mother language ..I’m facing some problem in expressing my idea in English.. Thanks again  

Thaumaturge

sarah sara said: Thank you CarolX… And also thank you very much Mr.Boscoeee..we have to evaluate the internal controls in the department and write it down in a report contains: Interdiction Findings and recommendations Audit opinion This is my first case study ..I feel lost..I feel like I need some directions.. As a beginning I defined the first problem which is that the training for the new employee was not good enough, then there is the credit card problem I think that every one having a credit card is so wrong and also there must be a properly reviewing every month of all the cried card expenses and also I didn’t like the way they approve it (the stamp idea) the third problem is the employee attendance is not accurate I thought maybe they can control it by using an advanced technology such as finger print and hand scan..what do u think?? I’m I doing well so far??how can I expires them with a good formal English?? ..actually English is my mother language ..I’m facing some problem in expressing my idea in English.. Thanks again Click to expand...

• May 12, 2009

Hi and good morning everybody, I’m so happy because of your replays J Actually it an internal audit program (operational financial) I’m so new in this field As I have understand from my instructor that we have to read each point and give recommendation and popper solution for this department.. So any ideas J Shell I put my recommendation for each point and we can discuses it together?  

• May 13, 2009

Hi everyone again,  

This is attachment 1 Steps in Training The teaching process can be broken down into five steps - Prepare, Tell, Show, Do, and Review. A closer look at each of these steps will assist the employer (trainer) in understanding this process. Discussion about this five-step process is drawn from publications on training by Dr. Bernie Erven of The Ohio State University. 1. Prepare The first step in this process is to prepare the learner. The trainer should put the learner at ease and explain why the skill to be learned is important. Explain any hazards or problems that may be involved and how to deal with them. Answer any questions that the learner may have about the task. 2. Tell Explain the task thoroughly. Break it down into key parts or steps. Most employees will find that learning several smaller tasks and putting those together is easier than trying to learn one large skill all at once. 3. Show Demonstrate exactly how the task or skill is to be done for the employee. Involve the employee by asking questions and getting feedback. Have the learner explain the process or skill back to the trainer. 4. Do The learner now has the opportunity to perform or do the task. The trainer needs to help the learner develop confidence by carefully monitoring the learner at first, then allowing him or her to work without supervision. The employer needs to make sure that the employee does each step correctly and avoids developing any bad habits. 5. Review Provide honest feedback to the learner in terms of encouragement, constructive criticism, and additional comments. This is a great opportunity to praise the employee or correct their progress. One means of providing feedback to the employee is to develop a check sheet with all of the job tasks listed. On a regular basis, the employer and employee should go over the sheet. Recognize the good points and explain what points need to be improved. This method keeps new employees up-to-date and involved with the review process. Conclusion Proper orientation and training of employees is one part of human resource management for the small business. Providing a thorough orientation sets the stage for a satisfying experience for both the employer and employee. The employer should assess the employee's skill level, identify what the learner should be able to do, and develop strategies in training the employee. The employer assumes the role of a teacher when training employees, using a systematic approach (prepare, tell, show, do, and review). Well planned and conducted orientation and training takes time and effort by both the employer and employee; however, the far-reaching benefits result in positive, productive, and motivated individuals.  

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Chancellor Rachel Reeves is taking immediate action to fix the foundations of our economy

In her first speech as Chancellor, Rachel Reeves laid out plans to rebuild Britain and make every part of the country better off.

Good morning.

Last week, the British people voted for change.

And over the last 72 hours I have begun the work necessary to deliver on that mandate.

Our manifesto was clear:

Sustained economic growth is the only route to the improved prosperity that country needs and the living standards of working people.

Where previous governments have been unwilling to take the difficult decisions to deliver growth…

… or have waited too long to act…

… I will not hesitate.

Growth [political content removed]. It is now our national mission.

There is no time to waste.

This morning I want to outline the first steps [political content removed] taken to fix the foundations of our economy.

So we can rebuild Britain and make every part of our country better off.

But first, let me address the inheritance.

I have repeatedly warned that whoever won the general election would inherit the worst set of circumstances since the Second World War.

What I have seen in the past 72 hours has only confirmed that.

Our economy has been held back by decisions deferred and decisions ducked.

Political self-interest put ahead of the national interest.

A government that put party first, country second.

We face the legacy of fourteen years of chaos and economic irresponsibility.  

That is why over the weekend I instructed Treasury officials to provide an assessment of the state of our spending inheritance so that I can understand the scale of the challenge. And I will present this to Parliament before the summer recess. 

This will be separate from a Budget that will be held later this year – and I will confirm the date of that Budget, alongside a forecast from the Office for Budget Responsibility, in due course.

All governments face difficult choices – and I will not shrink from those choices.

Those choices are made harder, however, by the absence of the economic growth necessary to not only balance the books but also to improve living standards.

New Treasury analysis that I requested over the weekend shows that, had the UK economy grown at the average rate of other OECD economies this last 13 years, our economy would have been over £140 billion larger.

This could have brought in an additional £58 billion in tax revenues in the last year alone. That’s money that could have revitalised our schools, our hospitals, and other public services.

Growth requires difficult choices – choices that previous governments have shied away from.

And it now falls to [political content removed] fix the foundations.

We have promised a new approach to growth – one fit for a changed world.

That approach will rest on three pillars – stability, investment, and reform.

Let me turn first to stability.

In the run-up to the general election, I set out the crucial first steps in our economic plans:

To deliver economic stability, so we can grow our economy and keep taxes, inflation and mortgages as low as possible.

And that commitment stands.

I emphasised this commitment in a meeting with the Governor of the Bank of England on Friday, and I will do the same when I meet the chair of the Office for Budget Responsibility this week.

These institutions are guarantors of our economic stability and I will not be playing games at their expense.

Over the weekend I made clear to Treasury officials that the manifesto commitments that we were elected on will be kept to and they will be delivered on.

That includes robust fiscal rules.

And it includes our commitments to no increases in National Insurance, and the basic, higher, or additional rates of Income Tax, or VAT.

Now I know there are some who will argue that the time for caution is past.

[Political content removed].

That a large majority in Parliament means we have the licence to row back on the principles of sound money and economic responsibility.

I know that many of you aren’t used to hearing this after recent years. But I believe that the promises that a party is elected on should be delivered on in government and we will do so.

We do not take lightly the trust of voters who have been burned too often by incompetence, irresponsibility, and recklessness.

And to investors and businesses who have spent fourteen years doubting whether Britain is a safe place to invest, then let me tell you:

After fourteen years, Britain has a stable government. A government that respects business, wants to partner with business, and is open for business.

In an uncertain world, Britain is a place to do business.

Let me turn to how we will unlock private investment that we so desperately need.

[Political content removed] …plans to launch a new National Wealth Fund, with a remit to invest – and so to catalyse private sector investment – in new and growing industries.

And in March, the former governor of the Bank of England, Mark Carney, agreed to lead a Taskforce on the establishment of a new National Wealth Fund.

I can tell you today that I have received the report from that Taskforce, and I will be announcing the next steps in short order.

Alongside investment must come reform.

Because the question is not whether we want growth, but how strong is our resolve – how prepared are we to make hard choices and face down the vested interests;

How willing, even, to risk short-term political pain to fix Britain’s foundations.

The story of the last fourteen years has been a refusal to confront the tough and responsible decisions that are demanded.

This government will be different.

And there is no time to waste.

Nowhere is decisive reform needed more urgently than in the case of our planning system.

Planning reform has become a byword for political timidity in the face of vested interests and a graveyard of economic ambition.

Our antiquated planning system leaves too many important projects getting tied up in years and years of red tape before shovels ever get into the ground.

We promised to put planning reform at the centre of our political argument – and we did.

We said we would grasp the nettle of planning reform – and we are doing so.

Today I can tell you that work is underway.

Over the weekend, I met with the Prime Minister and the Deputy Prime Minister to agree the urgent action needed to fix our planning system.

Today, alongside the Deputy Prime Minister, I am taking immediate action to deliver this [political content removed] government’s mission to kickstart economic growth;

And to take the urgent steps necessary to build the infrastructure that we need, including one and a half million homes over the next five years.

The system needs a new signal. This is that signal.

First, we will reform the National Planning Policy Framework, consulting on a new growth-focused approach to the planning system before the end of the month, including restoring mandatory housing targets.

And, as of today, we are ending the absurd ban on new onshore wind in England. We will also go further and consult on bringing onshore wind back into the Nationally Significant Infrastructure Projects regime, meaning decisions on large developments will be taken nationally not locally.

Second, we will give priority to energy projects in the system to ensure they make swift progress…

… and we will build on the spatial plan for Energy by expanding this to other infrastructure sectors.  

Third, we will create a new taskforce to accelerate stalled housing sites in our country…

…beginning with Liverpool Central Docks, Worcester Parkway, Northstowe and Langley Sutton Coldfield, representing more than 14,000 homes.

Fourth, we will also support local authorities with 300 additional planning officers across the country.

Fifth, if we are to put growth at the centre of our planning system, that means changes not only to the system itself, but to the way that ministers use our powers for direct intervention.

The Deputy Prime Minister has said that when she intervenes in the economic planning system, the benefit of development will be a central consideration and that she will not hesitate to review an application where the potential gain for the regional and national economies warrant it.

… and I welcome her decision to recover two planning appeals already, for data centres in Buckinghamshire and in Hertfordshire.

To facilitate this new approach, the Deputy Prime Minister will also write to local mayors and the Office for Investment to ensure that any investment opportunity with important planning considerations that comes across their desks is brought to her attention and also to mine.

The Deputy Prime Minister will also write to Local Planning Authorities alongside the National Planning Policy Framework consultation, making clear what will now be expected of them…

…including universal coverage of local plans, and reviews of greenbelt boundaries. These will prioritise Brownfield and grey belt land for development to meet housing targets where needed.

And our golden rules will make sure the development this frees up will allow us to deliver thousands of the affordable homes too, including more for social rent.

Sixth, as well as unlocking new housing, we will also reform the planning system to deliver the infrastructure that our country needs.

Together, [political content removed] we will ask the Secretaries of State for Transport and Energy Security and Net Zero to prioritise decisions on infrastructure projects that have been sitting unresolved for far too long.

And finally, we will set out new policy intentions for critical infrastructure in the coming months, ahead of updating relevant National Policy Statements within the year.

I know that there will be opposition to this.

I’m not naïve to that;

And we must acknowledge that trade offs always exist: any development may have environmental consequences, place pressure on services, and rouse voices of local opposition.

But we will not succumb to a status quo which responds to the existence of trade-offs by always saying no, and relegates the national interest below other priorities.

We will make those tough decisions, to realise that mandate. 

Be in no doubt – we are going to get Britain building again.

We are going to get Britain’s economy growing again.

We will end the prevarication and make the necessary choices to fix the foundations:

We will introduce a modern industrial strategy, to create good work and drive investment in all of our communities.

We will reform our skills system, for a changing world of work.

We will tackle economic inactivity and get people back to work.

We will take on the hard work of reforming our public services, to make them fit for the future.

We will work closely with our national, regional and local leaders to power growth in every part of Britain.

And we will turn our attention to the pensions system, to drive investment in homegrown businesses and deliver greater returns to pension savers.

I know the voters’ trust cannot be repaid through slogans or gimmicks – only through action, only through delivery.

The Treasury I lead is proceeding on that basis.

I was appointed to this post less than 72 hours ago.

Upon my arrival, I told Treasury staff that the work starts straight away.

That work has begun.

I have commissioned and received economic analysis from HMT officials on the lost growth of the past 14 years, which I have set out today.

I have instructed Treasury officials to prepare an assessment of the state of our spending inheritance, to be presented to Parliament before the summer recess.

I have started working with the Prime Minister, to make the necessary preparations for the establishment of a Growth Mission Board, and that board will meet before summer recess, focused squarely on reviving our country’s economic growth and prosperity

I have established a new Growth Delivery Unit here, at the heart of  the Treasury.

I have received the recommendations of the National Wealth Fund Taskforce, and will shortly be announcing next steps.

There is much more to do.

More tough decisions to be taken.

You have put your trust in us.

And we will repay that trust.

The work towards a decade of national renewal has begun.

And we are just getting started.

Thank you very much.

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