EXPENSE ACCOUNT FRAUDWhile auditing the financial statements of Petty Corporation, the certified public accounting firm of True Blue and Smith discovered that its client's legal expense account was abnormally high. Further investigation of the records indicated the following:Since the begining of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.Swindle, Fox, and Kriep were not Pretty Corporation's attorneys.A review of the canceled checks showed that they had beeb written and approved by Mary Boghas, the cash disbursements clerk.Boghas's other duties included performing the end-of-month bank reconciliation.Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.Requireda. What control procedures could Pretty Corporation have employed to prevent this unauthorizes use of cash? Classify each control procedure in accordance with the COSO framework (authorized, segregation of functions, supervision, etc).b. Comment on the ethical issues in this case.

Internal control is defined under the COSO framework as just a procedure meant to offer certainty of…

Answered: EXPENSE ACCOUNT FRAUD While auditing…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter9: Auditing The Revenue Cycle.

Section: Chapter Questions

Problem 8CYBK

See similar textbooks

Related questions

Question

EXPENSE ACCOUNT FRAUD

While auditing the financial statements of Petty Corporation, the certified public accounting firm of True Blue and Smith discovered that its client's legal expense account was abnormally high. Further investigation of the records indicated the following:

Since the begining of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.
Swindle, Fox, and Kriep were not Pretty Corporation's attorneys.
A review of the canceled checks showed that they had beeb written and approved by Mary Boghas, the cash disbursements clerk.
Boghas's other duties included performing the end-of-month bank reconciliation.
Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.

Required

a. What control procedures could Pretty Corporation have employed to prevent this unauthorizes use of cash? Classify each control procedure in accordance with the COSO framework (authorized, segregation of functions, supervision, etc).

b. Comment on the ethical issues in this case.

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Frauds in Accounting information system (AIS)

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.