Koss Case Essay examples

640 Words Feb 4th, 2013 3 Pages
Koss Case

1.) I believe the Principal Accounting Officer (PAO) should attest to the effectiveness of internal control when that position is not also the CFO. The PAO has extensive knowledge of the accounting processes and control structures within the company so an attestation on internal control effectiveness would be pertinent. In the Koss case, the PAO is the one perpetrating the fraud so the attestation from the PAO would be unhelpful. However, I do believe the opinion of this position does matter on assessing internal control effectiveness.
2.) When one individual holds that much control over an organization it becomes a huge inherent risk to the auditor. If one person is the CEO, CFO, and COO, there are not that
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It is clear from this case that it would have been helpful to have internal control effectiveness attestation. Mrs. Sachdava’s embezzlement from Koss company was a substantially material amount. Other companies that might have lax internal controls could suffer similar fates. Although there are situations where the cost would outweigh the benefit, I think it is still important for internal controls to be tested. There could be a provision for these smaller companies to have a smaller scale attestation of internal control effectiveness if they show that the costs outweigh the benefits.
5.) I think the big overall internal controls, especially in this Koss case, reside around lack of segregation of duties, appropriate authorization, and too much potential for management override. First of all, there should be a credit department that approves purchases, especially over certain limits. There should be separation between purchasing and disbursing money. This makes sure that one person does not have too much control over acquisition. Bank statements should be reconciled and checked for authorized purchases. These controls would have made Sachdava’s excessive purchases easier to uncover. Furthermore, I believe management overrides should be kept to a minimum and should be transparent to other executives if the action becomes necessary to override.
6.) In order from most contributing factor leading to the embezzlement to the least: No…

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