Cashing Vs Buckeye Check

Grant Thornton should be held liable for its reckless negligence because it ultimately prolonged Keystone bank’s ability to continue to partake in fraudulent activities. If the accounting firm would have held itself to GAAS, generally accepted as the minimum standard of professional conduct in performing an audit, Thornton would have known to exercise “heightened skepticism” during this high risk of fraud. Secondly, GAAS required written confirmations from third parties servicing assets in regards to a bank’s balance sheet. Not only did Thornton fail to obtain this written requirement, it also recklessly relied on an oral statement. GAAS also required in a high risk audit that monthly remittances of interest income on assets being serviced by

Ernie wrote unauthorized checks, forged the authorized signers’ names and then manipulated the bank statements to hide the disbursements. He also obtained access to the signature stamp and included unauthorized checks with legitimate checks when submitting them for signing. Finally, he used his position of authority to deflect questioning about unidentified disbursements. Mr. Sell had implemented some good internal controls but Ernie did not respect them. For example, Ernie fraudulently obtained bank statements after being warned by Mr. Sell that he was not to receive or review them. This procedure should not have been tolerated in-house, and the bank should not have been permitted to send bank statements directly to Ernie in the first place

Nextcard also had opportunity to misstate the account. It seems per the case that there were graphs and charts indicating there were problems at Nextcard, but since the audit partner signed an unqualified opinion the financial statement users were not aware of any problems and Nextcard stock prices continued to rise. An unqualified opinion should not have been given if there were indications of problems. The reason that this may have happened was that the audit partner was on the fast track and that the senior auditor had very little audit experience. The third factor is attitude and rationalization. There are several rationalizations Nextcard managers may have used. It is obvious that they wanted to be the biggest credit card company so they may have rationalized that the company could actually make money, or maybe they felt they were owed the money, or that it was not their fault that so many of their customers did not pay their debt. No matter what the rationalization was the audit team should have gotten a better understanding of management’s attitude toward ethical behavior in order to determine if they were capable of fraud.

There seems to be a huge issue with risk assessment regarding their accounts receivable. It seems to the audit team that there could potentially be more accounts that need to be written-off. CSN may not be identifying and analyzing all the accounts that they have because some accounts are over 90 days due. That is a huge risk assessment concern. Also, there may be an issue regarding invetory because their inventory is higher compared to the rest of the industry and there were issues with invetory the year before.

In the case of BSU’s fraud, a feat to this severity should never have occurred, There are several internal controls that can help a business or entity avoid this kind of fraud. Once this fraud case was discovered, BSU implemented several new internal controls. These internal controls include 1) requiring a direct report from the

As seen in the complaint filed by them, they accused L&H of inflating revenues, antedating contracts, to manipulate ratios. So, they did know of some practices, but were reluctant to follow through and be independent and abide by their code of conduct. The reason as to why they went along with these aggressive accounting practices could be many. One reason could be that L&H may have been one of their most profitable clients and were fearful of losing their client. They wanted to be associated with one of the largest and upcoming technology firms, a way of marketability when investors saw their audit reports. Although it appears that they were on the right track questioning about the collections, they did not probe deep enough to find the source, the audit team did not have a good oversight from the partner or the in-charge. This clearly reflects the tone that they were willing to compromise with the evidence.

Additional steps should have been taken by the auditors when they received the smudged fax copy printed on the Bank of America letterhead. As mentioned before, the evaluation of the evidence obtained is as important as requesting it. The firm did not confirm the forged documents with the bank; for this reason, the evidence remained unreliable and the forgery wasn’t revealed until later. Auditors should have been concerned with knowing where and whom the confirmation letters came from. Was the initial confirmation request mailed directly by Grant Thorton SpA or by Parmalat or was it obtained directly from the bank? Auditors should be aware that confirmations that are sent through fax are much less reliable than confirmations sent by mail. Their duty was to find out if the correct process was altered in any way.

Before a check authorization is issued, the following documents must be in agreement, except for the

They had a conflict of interest what the rating for the mortgage-backed securities. Baum even says in the movie that they were “writing ratings for fees”. Meaning that they would rate the CDOs at whatever rate the company wanted in order to make their fees. They did this because they knew that if they did not say a positive rating the company would go elsewhere until they got the rating they wanted. After, looking into this fraud I found that the government actually sued Standard & Poor for this issue after the crash. Standard and Poor ended up paying $1.5 billion dollars for a collection of law suits that were connected to the fraud

Under the Corporations Law, ASIC is responsible in consumer protection and market integrity. Due to financial planning systems, Commonwealth bank has lost a lot of money because of the theft and fraud. They will lose customers as well due to this situation.

Authorization is then acquired from the issuing bank, and whether the payment should be accepted or declined, depending on the status of the payment information given by the customer.

Preventative controls were not implemented as just previous to the first fraudulent loan; the computer services arrangement was dropped making it almost impossible to detect any fraud. The detective controls were not implemented because there were internal auditors that did not pick up on the fact that several loans were given to 5 people, one of whom was not existent, and because the amounts of the checks were low, they were not flagged. The corrective controls were implemented as the bank itself was charged with a felony because they did not report cash transactions that were more than $10,000, as is the standard procedure. There were no long-term clerks during that time to be able to catch the multiple checks for the same people as they were rotated on a regular basis which made follow up impossible.

The main issue in this case is that in the standard audit reports that go with the financial statements, “the auditor’s responsibility for detecting fraud is not discussed (Mancino, 1997)”. This is occurring because “auditors do not examine every transaction that happens or event and that would mean there is no guarantee that all material misstatements, whether caused by error or fraud could be detected (Mancino, 1997)”. There should be a spot on the audit report that states the auditor’s roles and their limitation into finding fraud. “There also seems to be some issues between the rules of the PCAOB has and the language that auditors use in their reports do not match (Holl, 2005)”. They should add a phrase to their audit reports that says it was either caused by error or fraud and to take accountability of knowing fraud had happen since it is the auditor’s job to show that the financial statements are free of material misstatements. Another reason this is occurring is the fact it is pretty much a pass or fail type of report it is not very detailed.

Select bank accounts for confirmation in order to obtain a moderate to low level of assurance that the aforementioned audit objectives are achieved. Bank confirmations should be sent to all banking relationships to identify accounts not included in the general ledger.

While Bala Karthika, Branch manager of Bharatiya Mahila Bank ,Anna Salai in Chennai explains the process of bank verification. “At the time of opening the account we have a look at their resolution paper, we check saving habit of SHG. Before sanctioning the loan, the branch manager is supposed to visit their meeting, check the members, see how many of them are poor, we see if they are working in any govt jobs, private companies etc.We carry out rating based on this,” says