Auditors and Regulatory Oversight

Auditors and Regulatory Oversight
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Truckload Freight Company Accounting Scandal
Over the decades, accounting frauds have become the norm of the day. SEC (Securities and Exchange Commission) closed its investigation on Truckload Freight Company for falsifying financial documents. Sec also charged Celadon Group Inc, a company based in Indianapolis, to create false financial documents for the Truckload Freight Company. According to SEC (2019), the audit company failed to acknowledge on the financial report that the company failed to disclose the client's losses (more than $20 million). Typically, Celadon Group Inc was trying to cover up financial challenges faced by the client company (Truckload Freight Company).
Legal Liabilities
According to the financial report released by SEC, Celadon Group Inc and Truckload Freight Company have legal liabilities to the third parties, which relied on them as per the federal laws (Toby, 2020). Third-party liabilities are losses that occur to third parties such as shareholders and investors due to negligence or omission of significant financial information on annual reports. Firstly, Celadon Group Company which is the auditing firm is liable to third parties due to negligence. The company neglected the fact that the company was facing financial difficulties hence creating false documents. The primary objective of the SEC is to ensure that all public and private trade companies comply with the auditing regulations. Therefore, it relies on the information released by audit firms. In this case, Celadon Group does not reflect honesty, integrity, and transparency, which is a legal liability. Both Truckload Freight Company and Celadon Group have affected the shareholders and investors by providing wrong financial documents. Based on the three scenarios, the two companies prepared false documents hence legal liabilities to investors, SEC and shareholders.
Audit Violations According to GAAS
GAAS are typically the guidelines that auditors should use when undertaking their professional duties. The primary objective of GAAS is to ensure transparency, accountability, and verifiability of all financial information complied by auditors (Pratibha, 2021). Firstly, Celadon Group Inc provided falsified documents which were not verifiable. In this case, the information was not in accordance with the regulations of SEC and GAAS. Additionally, the company violated the standards of financial reporting. For example, Celadon company did not disclose that the information provided was not sufficient and had some gaps. The financial report released expressed the wrong opinion; it reflected that the company had a healthy financial standing. However, as per SEC investigation, the company had financial difficulties. GAAS required auditors to perform intensive scrutiny on sales to confirm the profits; Celadon violated this guideline. Inde...