Running Head: Fraud and embezzlement in Sidney Airport Limited 1
Fraud and embezzlement in Sidney Airport Limited 7
Fraud and embezzlement of funds in Sidney Airport Limited reported in the financial year ending on 2019
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Introduction
Fraud and embezzlement of funds formulate primary aspects which mitigate growth and going concern concept for business entities. The information provided by (American Institute of Certified Public Accountants., & Wiley InterScience 2018), provides a profound insight on embezzlement as any form of white-collar crime in which a respective individual or business entity misappropriates the assets mortifying the certainty of short-term and long-term operability pentagram. Consequently, business fraud can be described as the dishonest or illegal activities perpetrated by a respective employee in a business setting contrary to ethics prescribed in international standards of accounting (ISA 315).
Sidney Airport limited can be described as one of the leading operating commercial airport across the globe and the most recognized business entity with great revenue returns to the economy of Australia republic. The information provided in the statement of financial position for the year ending 2019 indicates that 42.6 million passengers predominantly preferred this business entity. In addition, a range of over 300,000 aircraft movement for the financial year 2016 to 2017 were recorded which enhanced increased revenue returns to $1,483.3 million. This terminal was officially commissioned in the year 1970 by Queen Elizabeth II. The first airplane to be flied was enhanced in the year 1970.
As a result of enhanced market returns over the financial years, the company was expanded to become one of the biggest runways in the year 1992 and has since undergone several refurbishments that saw the great breakthrough during the 2000 Olympic Games. The company has since been reporting enhanced profit maximization as a result of increased numbers of customer preference and sustainable going concern due to enhanced revenue earnings. Up until the recent financial period, this company has demonstrated enhanced customer satisfaction by being enlisted amongst the business entities reporting high level of income in Australian market.
However, this condition ought to have been altered in the recent past as a result of fraud and embezzlement of fund by the top management which has negated operations in this industry translating to decline on the net reports income. Minimal airline transportation and business operation as a result of poor customer services related to fraud and embezzlement of assets has drastically minimized the level of revenue returns for this company forcing the management committee to introduce operational measures which are characterized with reduced gross profit margin.
Audit risk management need to be conducted more vigorously to make sure the going concern concept has been made certain on a long run bases and eradicate fraud occurrence or embezzlement of entities resources. It is the primary responsibility of audit committee to critically review the financial performance of this business entity and ensure financial obligations have been mitigated whatsoever so as to ascertain business operations on long run bases. According to the report presented on (Sydney Airport Limited 2019), this business entity faces several range of fraudulent cases and fund embezzlement from the previous management that almost saw the entities downfall in the financial year ending on 2019.
Further, operations of this respective entity are depended variables to full functionality of the terminals, technological infrastructures and roads that need to be constantly reviewed to enhance effective and efficient business operations. Fraudulent activities and mismanagement of funds have characterized the increased liabilities and decline in the cash equivalents for the financial year ending on 2019 negating the operability curve of this enterprise.
The report presented by (Sydney Airport Limited 2019), indicates that this business entity also encounters mismanagement of funds in terms of financial management for short term and long term attainment of obligations. According to the information provided in the statements of financial position, Sydney Airport has a net debt of $8.4 billion characterized by increased fraudulent cases and embezzlement of financial resources signifying the need therefore for advanced refinancing of portions geared at subsidizing these financial obligations. Subsequently, airline customers and airport partners may experience adverse financial and operating conditions which negate their respective financial status. These factors therefore have an adverse effect to the revenues and other expected costs to be generated by the customers to this business entity leading therefore to marginalized revenue return. The reduction of the level of expected revenue and other expected earnings negatively affect the going concern concept which hence require critical audit review to be conducted frequently.
International standards of auditing 570 and 705 are the disclosures which provide a leeway of managing fraud and embezzlement of financial resources highlighting the existence of going concern problems that might be encountered along the way affecting the business operations on a long run perspective. It is hence the objective of entities management to provide the expected advice inform of a matter paragraph which contains precise explanation on doubts that relate to the business operations in the near future (Moeller, 2011). Auditors objectivity is also a significant tool which is used in enhancing system improvement through prevention of financial errors and fraud that might lead to mismanagement of the available resources.
For instance, the main threats related to fraud and mismanagement of funds include self-interest menace which is enhanced as a result of holding direct or indirect financial interest in the respective organization or even provision of a major fee by the client which has an adverse effect on auditors independence. The provisions contained in international Auditing Standards 200 provide a detailed explanation of auditors independence as the unbiased and professional opinion provided by an auditor regarding the financial performance of a given entity. Conflict of interest can be avoided by ensuring direct or indirect financial interest has been avoided. In addition, receiving any fee payment which is not constitutional regarding the business operations whatsoever is unethical and should not be accepted, (Sydney Airport Limited 2019), acknowledged.
This has been encountered by the management of this business entity during the selling and advertising the products of the respective company whilst serving as an auditor for the company. Presentation of a true and a fair view might be compromised as a result of the auditor issuing a favorable report to increase the sales price of this company. Advocacy threat could be avoided by ensuring no direct involvement in the companys day to daily business operations. Familiarity threat is another significant feature which constitute to embezzlement of funds altering the operational pentagram outlined in the entities budgetary allocation.
Eradicating fraudulent activities and misappropriation of financial resources will hence be based on ensuring no close relationship between employees and the companys stakeholders whatsoever. Further, ethical code of conduct is another guiding tool through which such vises could be mitigated from occurrence enhancing increased income returns and maximum utilization of the available resources to generate the expected returns.
Conclusion
In summary, consequent application of auditors opinion in eradicating fraudulent activities and mismanagement of funds will minimized through the adoption of more reforms as prescribed in the report of (Aicpa, 2020) leading to more précises ethical code of conducts in the organization. Mitigation of the internal weakness which is encountered by the management of any given organization will be mitigated as a result of enhanced ethical reforms which will hence make the presentation of financial information to be free from conflict of interest, true and fair view. Uniformity of the presented financial statements for this entity is another primary aspect that will tend to mitigate fraudulent activities and embezzlement of financial resources for Sidney Airport Limited in accordance with the International Auditing Standards translating to certainty of revenue returns on a long run perspective.
Reference list
AICPA, (2020). AUDIT RISK ALERT: General accounting and auditing developments 2019/2020. Place of publication not identified: JOHN WILEY.
American Institute of Certified Public Accountants., & Wiley InterScience (Online service). (2018). Audit risk alert: Employee benefit plans industry developments, 2018.
Moeller, R. R. (2011). COSO enterprise risk management: Establishing effective governance, risk, and compliance processes. Hoboken, N.J: Wiley.
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