Actg 440-Case 3 Essay

1001 WordsAug 3, 20135 Pages
1. a) Since the treasurer diverted a substantial amount of the fund’s earnings to his personal use and systematically underrecorded income earned, we could consider this as a financial reporting fraud. The auditor would have identified the risk primarily through analysis of financial results and review of operational procedures. b) The auditor should pay close attention to the changes of company’s financial result and analyze those changes in time to see if they are reasonable. Most auditors should have detected this kind of material misstatement in company’s financial results, because this defalcation is caused by a personal factor. c) We should forecast its audit procedure in order to eliminate the risks in audit progress. Thus,…show more content…
Otherwise, the audit is necessary to be planned because this defalcation is caused by personal factor. c) Most of the time, a separation of duties would have been effective in preventing or detecting the defalcation. Otherwise, we should develop a new audit procedure to detect the perpetrate fraud, such as forming a new organizational structure, establishing a more complex financial instruments. 4. a) Since the purchasing agent receive perks and kickbacks from vendors. Therefore, this is a corruption of fraud. The auditor would have identified the risk primarily through review of industry trends. b) The company should obtain useful and instant information to detect the fraud risks. Meanwhile, the purchasing department should also check the purchasing information from all vendors more often in order to find out doubtful points. If the auditors could find enough information, they could prevent the defalcation. c) The company should establish an analytical procedure to prevent the defalcation. The auditor should not only pay attention to company’s financial results, but also take charge in the relationship between company’s internal data and the market data. If there is any higher-than-market purchase exists, it is necessary to check if it is fraud or not. 5. a) In this case, the supervisor and the payroll clerk colluded to add an extra person to the payroll. Thus, we could

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