An Audit Quality Inspection Scandal: Ethical Lapses in a Misguided Attempt to Alleviate Regulatory Scrutiny

In 2017, KPMG discovered that several high-ranking partners in its Department of Professional Practice (DPP) had surreptitiously obtained highly confidential information on upcoming PCAOB inspections. In obtaining this information, these KPMG partners were able to anticipate and prepare for PCAOB inspections, causing the firm’s inspection deficiency rate to plummet and its executives to tout the success of their efforts to improve audit quality. Once the firm discovered the scandal, the individuals involved were terminated, and six of them were ultimately convicted of felonies. This case study introduces students to relevant auditing standards, audit quality concepts, and facilitates discussion of a number of ethical issues. Learning objectives for this case include obtaining an understanding of the PCAOB and its inspection program, understanding audit documentation standards, demonstrating the ability to evaluate ethical issues, applying the fraud triangle in a unique setting, and assessing responsibility for the various parties involved.

Reading and Calculation Neural Systems and Their Weighted Adaptive Use for Programming Skills

Software programming is a modern activity that poses strong challenges to the human brain. The neural mechanisms that support this novel cognitive faculty are still unknown. On the other hand, reading and calculation abilities represent slightly less recent human activities, in which neural correlates are relatively well understood. We hypothesize that calculus and reading brain networks provide joint underpinnings with distinctly weighted contributions which concern programming tasks, in particular concerning error identification. Based on a meta-analysis of the core regions involved in both reading and math and recent experimental evidence on the neural basis of programming tasks, we provide a theoretical account that integrates the role of these networks in program understanding. In this connectivity-based framework, error-monitoring processing regions in the frontal cortex influence the insula, which is a pivotal hub within the salience network, leading into efficient causal modulation of parietal networks involved in reading and mathematical operations. The core role of the anterior insula and anterior midcingulate cortex is illuminated by their relation to performance in error processing and novelty. The larger similarity that we observed between the networks underlying calculus and programming skills does not exclude a more limited but clear overlap with the reading network, albeit with differences in hemispheric lateralization when compared with prose reading. Future work should further elucidate whether other features of computer program understanding also use distinct weights of phylogenetically “older systems” for this recent human activity, based on the adjusting influence of fronto-insular networks. By unraveling the neural correlates of program understanding and bug detection, this work provides a framework to understand error monitoring in this novel complex faculty.