...post event analysis which provides the company with an excellent "lessons learned" opportunity. During this process stakeholders need to be asking the tough questions and gathering information to identify the factors that allowed the event to occur. Featured Resource Presented by Citrix Systems 10 essential elements for a secure enterprise mobility strategy Best practices for protecting sensitive business information while making people productive from Learn More The process should not be viewed as a fault finding mission but a determination of whether there was a company, policy, procedure or guideline in place to address this situation, whether the guidelines were followed as designed or adequate to address (or prevent) the specific situation that occurred. If the fraud event occurred because an employee(s) simply failed to follow the internal control policies, then there are corrective measures that business units may take to ensure policies are followed in the future. These include communication to employees regarding increased awareness, correct handling processes and policy adherence. It may simply be that employees performed as expected under the circumstances but there were insufficient internal control policies in place to guide their behavior. Lessons learned here will strengthen internal controls through the creation of new ones. Also learn about the basics of internal investigations A fraud event...
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...Question 5 (5 marks) 6 Question 6 (12 marks) 7 Question 7 (26 marks) 8 Question 2 (12 marks) a. If auditors expect clear evidence of material fraud during the planning phase of the engagement, the Canadian Auditing Standards require that the engagement team discuss where the financial statements may be materially misstated due to fraud. Agreed. The auditors should communicate so that the team maintains an independent state of mind at all times during the audit. The audit approach and tests/procedures are customized to the fraud assessment made. The audit team can incorporate random testing and sampling approach in the audit work which are difficult to anticipate by the client. Also the team understands where the focus will be as a result of the fraud assessment b. Theft of personal property from the business for the purposes of depriving the owner of its possession is a method of fraud referred to as lapping. Disagreed. Lapping refers to misappropriation of cash receipts. The theft is concealed by manipulation of A/R to cover the cash receipts. The cash received later is recorded toward the original A/R. The fraud is also covered by recording cash transfers to rare expenses or other accounts in G/L. c. A critical evaluation of evidence and professional skepticism are required for all financial statement audits, fraud examinations, and financial forensic examinations. Agreed. A critical evaluation of evidence is required to ensure that what has been stated is not...
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...documentation, performedanalytical procedures to evaluate the reasonableness of the revenuesrecorded on the contracts, and visited selected restoration sites.Comment on the limitations of the evidence that these proceduresprovide with regard to the management assertion of occurrence. Upon the performance of those procedures, the auditors of ZZZZBest Inc. had obtained evidence in order to draw reasonableconclusions on which to base the audit opinion. However, theseevidences are subject to limitations due to factors not controlled by theauditors. First limitation of the evidence is its insufficiency to supportthe occurrence, reliability and relevance of events and transactions.Mere paperwork is not enough to prove an event to have existed. Italso needs inquiries from people accountable in recording orrecognizing such events. Moreover, there’s a risk in being dependenton evidences provided by the management itself. Auditors should askcooperation from the third parties in order to verify all records. Secondlimitation is the rules implemented by the client which prohibit auditorsto further inspect or review the financial standing of the company.Some clients make some arrangements with the auditors as to howwide their scope in auditing would be. As a result, auditors fail touncover misstatements or manipulations in the financial statements. Third limitation is the consideration of the relationship between thecost of obtaining audit evidence and the usefulness of the informationobtained...
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...Assignment 3: Fraud in the AIS Ditanyan Patterson Jay E. Wright, CPA, CFE Strayer University ACC.564 August 17, 2014 Abstract After researching for a firm that was involved in a fraud and/or embezzlement case I came upon the embezzlement of Koss Corp. Koss Corp was a company in Milwaukee, Wisconsin that manufactured stero headphones, speaker phones, computer headsets, wireless headsets, and much more. The case of Koss came about because of inaccurate financial ststements, books and records, and the lack of adequate internal controls from the years of 2005-2009. Two of Koss former employees, Sujata Sachdeva and Julie Mulvaney were the ones to engage in a wide-range of accounting fraud to cover up Sachdeva's embezzlement scam. From the lack and inadequate internal controls and failures in overseeing the accounting and financial reports by the CEO and CFO they were able to embezzle a huge amount of money. Throughout my research I will write a paper in which I must assess the failures of the firms accounting information system to prevent the related fraud/ embezzlement; Also, evaluate the effectiveness of Koss stakeholders in the event that a third-party accounting system suffers a breach. Along with assessing the level of responsibility of the software provider to the business and their clients. This paper will determine what advances in accounting and/or information technology could have done to prevent such acts from occuring, the paper will give changes that should...
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...Controls Attention: President/CEO The purpose of this report is to discuss internal controls and security for LJB, and compliance with current policies. In order to be receptive to recommendations and change, it is imperative that a thorough understanding of how internal controls and security play into the profit and growth of the company. Effective internal control gives reasonable assurance, not guarantee, that all business objectives will be achieved. It extends beyond the aim of ensuring that all financial reports are reliable. It includes the efficient operation and compliance with laws, regulations, policies, and contractual obligations. It requires concerted effort on an ongoing basis; businesses are now systematically documenting, testing, evaluating, and improving their internal control and security measures. Effective internal control does not necessarily cost more, it reduces costly risks of avoidable losses and business failure and enable to operate in a more safely and profitable manner. After describing the merits of internal control, the business definition of internal control; Systematic measures (such as reviews, checks and balances, methods and procedures) instituted by an organization to (1) conduct its business in an orderly and efficient manner, (2) safeguard its assets and resources, (3) deter and detect errors, fraud, and theft, (4) ensure accuracy and completeness of its accounting data, (5) produce reliable and timely financial and management information...
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...Curbing Fraud Through Risk Assessments Abstract The purpose of this paper is to discuss the psychology behind why people commit fraud and how a risk assessment can be used to mitigate fraud and risk towards a given organization. The risk assessments portion of the paper will discuss areas such as a process for an effective fraud risk assessment which includes defining a risk scope, risk treatments (acceptance, avoidance, transfer, mitigate, or a combination approach), and most importantly risk monitoring and review through controls. The paper then discusses in detail the importance of proper risk modeling then finished with an analysis on an actual fraudulent activity around the abuses with SNAP benefits. Risk Assessments: Merriam-Webster defines fraud as the “intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right.” Some type of fraud scheme or business exploit is in the news headlines every day. Anything from employees stealing money out of cash register to multibillion dollar pyramid schemes is seeming becoming a common segment on the news right next to this week’s weather forecast. The opportunity for a common person or company to fall victim to fraud is paramount. Often times a business simply doesn’t know where their most susceptible operations reside. This limitation causes billions of dollars of fraud to commence every year, and often times the company won’t know they aren’t being scammed until it’s...
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...IMPORTANCE OF FORENSIC ACCOUNTING IN LISTED COMPANIES IN MALDIVES. 9 2.2 FORENSIC ACCOUNTING HELPS TO ELIMINATE CORRUPTION. 10 2.3 FORENSIC ACCOUNTING INFLUENCES THE ORGANIZATIONAL PERFORMANCE 11 2.3 CURRENT SITUATION IN MALDIVES. 12 CHAPTER 3 – RESEARCH METHODOLOGY 14 THEORETICAL FRAMEWORK 14 3.2 TYPES OF DATA 16 3.3 SAMPLING DESIGN 17 3.4 DATA ANALYSIS 17 3.5 HYPOTHESIS TESTING 18 4. CONCLUSION 19 REFERENCE 20 IMPORTANCE OF IMPLEMENTING FORENSIC ACCOUNTING IN LISTED COMPANIES IN MALDIVES. CHAPTER 1 1.1 ITRODUCTION The main purpose for this research to be carried out is to investigate the importance of forensic accounting in the business world, and how important it is to implement a solid forensic accounting system in the listed companies in Maldives. This chapter provides an overview of the study that contains the background of the study, the statement of the problem, research objectives, significance of the study the limitations faced while doing the study and the scope in which the research had been carried out on. 1.2 BACKGROUND OF THE STUDY The background of the study defines what accounting is and what are the specialisms in forensic accounting compared to normal methods of accounting. And also this part of the research introduces the current situation of the accounting environment in Maldives and also introduces the listed...
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...Management Representations 1941 AU Section 333 Management Representations (Supersedes SAS No. 19.) Source: SAS No. 85; SAS No. 89; SAS No. 99; SAS No. 113. See section 9333 for interpretations of this section. Effective for audits of financial statements for periods ending on or after June 30, 1998, unless otherwise indicated. Introduction .01 This section establishes a requirement that the independent auditor obtain written representations from management as a part of an audit of financial statements performed in accordance with generally accepted auditing standards and provides guidance concerning the representations to be obtained. Reliance on Management Representations .02 During an audit, management makes many representations to the auditor, both oral and written, in response to specific inquiries or through the financial statements. Such representations from management are part of the audit evidence the independent auditor obtains, but they are not a substitute for the application of those auditing procedures necessary to afford a reasonable basis for an opinion regarding the financial statements under audit. Written representations from management ordinarily confirm representations explicitly or implicitly given to the auditor, indicate and document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding concerning the matters that are the subject of the representations. [Revised, March 2006, to reflect conforming...
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...Investigating Fraud Risk In the backlash of fraud and failed auditing, a more stringent standard for auditors was enacted in hopes to avoid the failures of the early 2000s. The Sarbanes-Oxley Act and statements of auditing standards such as SAS 99 were put into place to accomplish this goal. Yet, with more stringent standards comes a heightened public expectation that may increase the potential litigation auditors face. In the world of auditing, a very important aspect that should always concern an auditing firm is the risk of litigation exposure that a firm may encounter in performing an audit. Here, we will look at the guidelines advocated by Statement on Auditing Standard No. 99 in the context of several scenarios to see how the procedures promoted by it may increase the risk of litigation exposure that a firm faces in the event that fraud goes undetected. Statement on Auditing Standard no. 99 requires, as part of planning the audit, that there be a discussion among the audit team members to consider how and where the entity's financial statements might be susceptible to material misstatement due to fraud and to reinforce the importance of adopting an appropriate mindset of professional skepticism. SAS 99 instructs auditors to identify general and specific fraud risks that might be present in a client’s company. While this initial identification of areas where potential fraud risks exist is of great importance for the auditor to reveal actual fraud, taking these...
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...repairing legitimacy: a case study of impression management in response to a major risk event at Allied Irish Banks plc Philip Linsley* The York Management School, University of York, Heslington, York, YO10 5DD, UK E-mail: pl521@york.ac.uk *Corresponding author Peter Kajüter University of Münster, Chair of International Accounting, Universitätsstr.14-16, D-48143 Münster, Germany E-mail: peter.kajueter@wiwi.uni-muenster.de Abstract: Risk events can cause significant damage to a firm’s reputation and legitimacy. From the perspective of legitimacy theory, there are four broad strategies to restore reputation and repair legitimacy in response to a risk event. The annual report is a potential vehicle for communicating these strategies to the firm’s stakeholders and, therefore, the discretionary disclosures explaining the strategies implemented can be regarded as a means for managing reputational risk. This paper analyses annual report disclosures published in response to a major risk event at Allied Irish Banks plc. The empirical results suggest that legitimacy theory can usefully explain the disclosures. However, the findings from the case analysis also indicate that the disclosures made by Allied Irish Banks plc were not wholly effective in re-establishing legitimacy and thereby demonstrate the need for effective internal control and risk management systems that reduce the likelihood of risk events occurring in the first place. Keywords: disclosures; internal control; impression...
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...Chapter 1 Professional Ethics & Conduct * Non-auditor services. Pg 654 * Whether auditor can prepare financial statement for the bank? 1. Listed (Cannot) 2. Not Listed (Can) Section 201 of SOX -Provided of some safeguards -Not involved in decision making * Gift & Hospitality pg 644 * Amount is insignificant X Amount is significant * Fees & Pricing pg 651 * Effect the quality of the job * Low pricing “ low bolling” * If you’re the auditor of B, you notice there is a mistake, you told them to change but they refuse. You resign. They appoint another auditor. Can you review the successor? * Can review if you ask permission from client * If without the consent from the client, you can’t review ( breach of confidentiality) * You’re auditor for A. B is the supplier for A. In the same time, B prepare financial statement, found that A haven’t pay the money, B ask you to investigate why A haven’t pay? Can you as the auditor for A reveal the information? * You can’t reveal * Issue of confidentiality; issue of interest pg 643 * You can’t help B because you’re the auditor for A. * Concept True & Fair pg 21 * Is there a meaning of True & Fair? * Yes. It is a legal term as mentioned in Companies Act 1965. There is no proper definition on true and fair. * It is not correct or error ( guarantee or giving absolute assurance) * It is only give reasonable assurance...
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...Blossom’s audit file 3 The Cherry Blossom’s Management 3 Permanent Cherry Blossom’s Audit file 3 Cherry Blossom’s Website 3 Cherry Blossom’s Competitors financial statements 4 Audit risks and Auditors responses 4 The factors the finance director should consider before establishing an internal audit department. 6 WEAKNESSES IN THE SALES AND COLLECTION DEPARTMENT 7 The effects of the above weaknesses 8 Recommendations 8 REFFERENCES 10 Qn1. (a) Substantive procedures TRADE PAYABLES AND ACCRUALS * The comparison of Sakura’s trade payables and list of the accruals should be done against the prior year and investigate the significance differences. * Check the after date payment and then compare if they relate to the current year so as to follow through the purchase ledger or accrual listing to ensure that they were all paid in the correct period as stated. * Discuss with management the process they have undertaken to quantify the understatement of trade payables due to the cut-off error that happened that the purchase ledger earlier than its period and consider the materiality of the error. * Calculate the trade payable days for Sakura Beauty Club Co (Sakura) and compare to prior years, investigate any significant difference, in particular any decrease for this year. * Select a sample of goods received notes before the year end and after the year end and follow through to inclusion in the correct period’s payables balance, to ensure correct cut-off...
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...Systems and the Accountant Accounting Information System (AIS) * the study of the application of information technology to accounting systems * a collection of data and processing information that creates needed information for its user Data * raw facts about events that have little organization or meaning – for example, a set of eaw scores on a class examination Information * processed data that are useful and meaningful – for example, by sorting, manipulation, aggregating or classifying them Audit Trail * the path that data follow as they flow through an AIS Information Overload * the situation where too much information, and especially too much trivial information, can overwhelm its users, possibly causing relevant information to be lost or overlooked Enterprise Resource Planning (ERP) system * software that integrates information subsystem into one application. An example of such software product is SAP ERP, which combines accounting, manufacturing and human resource subsystems into an enterprise-wide information system Predictive Analytics * include a variety of methodologies that managers might use to analyze current and past data to help predict future events Knowledge Workers * workers who produce, analyze, manipulate and distribute information about the business activities E-business * conducting business over the internet or dedicated proprietary networks E-commerce * a subset of e-business * refers mostly to...
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...Financial Analysis – JET2 Task 1 Report for Competition Bikes, Inc. Competition Bikes, Inc was formed in 2001 and manufactures professional and performance bicycles used in a variety of racing events for expert riders. Bicycles produced by this company are ridden by 60% of all race winners and word of mouth has been their main marketing strategy. Competition Bikes is also the first company to use drive shaft technology in their bikes, which sets them apart from their competitors. A horizontal, vertical, trend and ratio analysis of Competition Bikes has been completed and is summarized in the review below. HORIZONTAL, VERTICAL, & TREND ANALYSIS Beginning with a comparison between year 6 and 7, sales in units rose from 3000 to 4000 which was a 33.3% increase in the number of units sold and is reflected in total Net Sales which rose from $4,485,000 to $5,980,000. Consistent with this same increase of 33.3% were sales commissions, distribution network support, transportation out costs, and total selling expenses. The total cost of goods sold increased 31.8%; this helped the company produce their product at a lower cost adding to their overall profit margin. The gross profit margin from year 6 to year 7 increased 37.5%. The company increased both their advertising and research and development 37.5% between year 6 and 7, this can strengthen their market base and aide in the development of new or improved products. Administrative salaries increased 21.4% and Executive...
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...PROBLEM 5 LITERATURE REVIEW 6 a. Introduction 6 b. The Need for an Audit 7 c. Risk of fraud 8 d. The Auditor-Investor ''Expectation Gap'' 9 e. Auditing Profession and Challenges 9 f. Public opinion 10 g. Family or Personal Relationship 10 h. Integrity 11 i. Inherent limitations of an audit. 11 j. Responsibility of Auditors to Third Parties – Case Law 12 k. International, Assurance Auditing, Standards Board (IAASB) 14 CORPORATE FRAUD CASES 16 CASE STUDY: 21 CONCLUSIONS………………………………………………………………………………24 REFERENCES……………………………………………………………………………..….25 SUMMARY OF TERMS ISA: International standards of Audit KPC: Kenya Pipeline Company IAASB: International Assurance Audit Board IFAC: International Federation of Accounting USD: United States Dollar KCB: Kenya Commercial Bank BCCI: Bank of Credit International SEC: Securities and Exchange Commission ABSTRACT The way in which auditors perform their duties and the auditing profession in general raises questions and puts the auditors on the spotlight from clients who rely on their reports. Questions on whether the public trust the way auditors perform their secondary duty of detecting errors and frauds, the reliability, completeness and accuracy of their auditing reports have been raised. The research focuses on; Management and auditors’ responsibility for its prevention and detection of fraud, the auditor’s responsibility for reporting fraud to management. The primary responsibility for prevention and detection of errors...
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