managed perception

Apart from the PIF class action, there is also one to be filed next year in Australia relating to the Depuy ASR Hip Replacement.
On Four Corners last, a lawyer involved in a class action in America regarding DePuy, said in affect that DePuys stated “The short term plan was to manage perception, in other words, lie like hell.”
Not to preempt any outcomes in the future hearings, do auditors in Australia “ manage perception ” or do they have a code of conduct that is truly binding?
I found the following warning signs interesting. Some to me ring a bell.

What do Enron, WorldCom, Tyco, Adelphia, Global Crossing, Xerox, and Parmalat all have in common? They were all considered financial statement frauds. During the past seven years, financial statement frauds have grown dramatically in both the number occurring and the size of the losses. Fraudulent financial statements affect shareholders, lenders, creditors, and employees. Consequently, many investors have lost confidence in the credibility of financial statements.

If any of these warning signs are present, it is incumbent on the auditor to look further into the matter:
• weak internal control environment
• management decisions dominated by an individual or small group
• managers who regularly assume subordinates’ duties
• management has a very aggressive attitude
• managers place great emphasis on earnings projections
• consistently late reports
• company profit lags the industry
• company is decentralized without much monitoring
• auditors have doubt about company as a going concern
• company has many difficult accounting measurement and presentation issues
• company has significant transactions or balances that are difficult to audit
• company has significant or unusual related-party transactions
• managers and employees tend to be evasive when responding to auditor’s inquiries
• managers engage in frequent disputes with auditors
• company accounting personnel are lax or inexperienced in their duties
These warning signs do not mean that fraud “is” occurring. They are indications that there is a much greater risk that fraud “could” be occurring. As we have seen with the numerous financial statement frauds in recent history, one of the first questions that is always asked is, “How did the auditors not see that?”