ACTG 440 Case 3 Essay

1160 WordsJun 17, 20155 Pages
Tae Woong Kwak Instructor: Bruce Darling ACTG 440 Case #3 Due: June 1st 2015 1. The treasurer of a small city. a. The risk is associated with the lack of segregation of duties and the potential of the treasurer to authorize the use of funds without any outside review. b. Yes, the auditor should have discovered this defalcation. The defalcation would most likely have been uncovered by performing a simple analytical test of multiplying the asset amount (certificate of deposit) by the applicable interest rate and comparing it with interest income. c. The organization had inadequate segregation of duties. The treasurer did both the investing and the recording. These activities should have been segregated. 2. The purchasing agent of a company…show more content…
This would be a difficult fraud to discover and would probably require the use of computer-assisted techniques to discover. Some audit procedures would include 1. Audit review of computer files (using computer audit tools) to list all recipients with unusual addresses, for example post office box numbers, or to identify any addresses with multiple recipients. 2. Perform a computerized review to match recipients with authorized lists of recipients and investigate any exceptions. b. This represents the type of fraud that would be detected only if the auditor had suspicion to believe that such a fraud existed. Internal auditors might routinely perform tests such as those identified in part 3 and would then detect the fraud. c. There is inadequate segregation of duties and independent supervision of social worker entries into the recipient list. Each addition to the recipient list ought to be verified by someone independent of the caseworker establishing the account. 4. A purchasing agent a. This activity would be detected only if the organization required bids on merchandise and the auditor compared purchase prices with bids to determine if the lowest bid was always accepted. Alternatively, the auditor could review account balances reflecting the products purchased by the agent to determine if unusual fluctuations existed. b. This is an extremely difficult type of fraud to uncover because the company is recording all the goods at the

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