Internal Audit: A Case Study

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Internal Audit We have evaluated your accounting practices and interpretations of your company. We have found red flags that indicate possible fraud or error in the preliminary findings. In this statement, we have included FASB codification rules, our opinion of how the rules protect against fraud, suggestions for correcting them, and internal control techniques for future prevention. The codification rules are not adequate to prevent fraud by themselves because accounts can be manipulated, assets stolen or misappropriated, and financial statements misstated. Internal control techniques can help alleviate some fraudulent situations. The leases on technology assets seem inflated. SAFS No. 13 states, "a lease is defined as an agreement conveying the right to use property, plant, or equipment (land and/or depreciable assets) usually for a stated period of time," (Statement of Financial Accounting Standard No 13, 1976). If a lease meets one or more of any of the following criteria, for a lessor or a lessee: transfers ownership of the property to the lessee by the end of the lease term, contains a bargain purchase option, the lease term equals 75% or more of the estimated economic life of the lease property, or present value of minimum leases payments is equal to 90% or more of the fair value of the leased property to the lessor, it is a capital lease. The last two do not apply if the beginning of the lease term falls within the last 25% of the estimated economic life of the
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