Cash and Audit

Cashand Audit

a) Asset misappropriation refersto misuseof thecompany’sassets. Whena companycaris usedforpersonalreasonapartfrom thecompany’sspeculation,thatis asset misappropriation. Fraudulentfinancialreportinghappenswhena personintentionallyconcealsoraltersfinancialinformationsuchthattherecordsare not trueandfair.Ms.Sachdeva andthetwo employeescommittedfraudulentreporting.b) Fromthequestionwearetoldthatshestolefromtheorganizationto sustainher lavishlifestyle. Wecan assumeshemight haverealizedweaknessin auditroutineandstartedto stealbecauseshethoughtshewill neverbecaught.Shemight havecolludedwiththeauditorsto stealfrom theorganization.Thesalarymight not havebeenableto sustainher lifestyle. Wecan alsodeducethatlackof departmentalsupervisionmight haveresultedtoher behavior.There waslackof integrityin employees’behavior.Lackof jobrotationin theorganizationmight havemadeher relationshipwith thetwo employeesunprofessional.Auditorsshould be vigilantandcarefulwhencarryingout their duties,thefactthatSue camefrom a wealthyfamilyshould not affecttheauditors’decision.Her lifestyle should haveraisedquestions.Auditors’should alwaysapproacheverysituationwith a skepticalmind.Theyshould havelookedat her lifestyle andinvestigatedwhetherher salarywasenoughto sustainher lifestyle andifnot theyshould havetriedto findout whereshegetsextraincometo supporther lifestyle.c) Koss Corporation dealswith stereoheadphones andrelatedaccessorieswhileAmerican Express dealswith creditcards,thetwo businessesarenot related.Thetransactionfrom Koss bankrecordsandcashier’schecksshould havebeennotedby theauditors.Computersconsist of programsusedby auditorsto readmagneticfilesandextractspecifiedinformationfrom files.Auditorsshould haveusedthisprogramto produceanyamountsabove one hundred thousand dollars,thisinformationwould haveproducedtheamountabovethatmoney.Bankrecordswould haveshownamountthat wasdebited andcreditedto her American Express accountd) Internalcontrolin auditing refersto proceduresthatan organizationusesto helpitsafeguardassets preventdetectfraudanderrorsandhaveaccurateandcompletefinancialrecords.Theorganizationshould haveimplementedmanagementcontrols,theseare controlsexercisedbymanagementpersonnelthat donot participatein thedayto dayroutine.Theorganizationshould haveperformedroutineandautomaticchecksandrotationof dutiesto avoidfraudanderrors.Theorganizationshould ensurethatthepersonnelemployedare of goodmoralcharacterandintegrity.There should be arithmetic andaccountingcontrol,authorizationandapprovalof transactionsby differentstaff.Theorganizationshould havesegregatedthedutiesto ensurethatnoonerecordsa wholetransaction.e) Theauditorshadaccessto previousfinancialrecordstheyshould havecomparedthosepreviousrecordswith currentrecordsandidentifiedanydiscrepancies.Theauditorshada chanceto comparerecordswith thoseof departments,forexample,costof saleandsalesarerecordedin salesandmarketingdepartment,thevariancein thetwo recordsshould haveshedlight.Ifassets wereoverstatedthebalancesheetcould haveshownthedifferenceandifitis significanttheauditorsshould haveraisedquestionstothemanagement.Theauditorshould havecomparedtheliabilityrecordsin theaccounting departmentwith loans,creditors,andanyotherliabilitiesandtriedto investigatewhetherthoserecordswerecorrect.Theauditorsshould havecomparedtotalexpensesin theaccountrecordsanddepartmentalexpensesof theorganization.f) Auditorsshould carryout their workwith duecareandskillsin conformitywith professionalandethicalstandardsof auditors.Auditorsshould beheldliableiftheyexercisednegligenceincarryingout their duties,butauditorsshould not be heldliableiffraudwasfoundfarfrom their scopeas per theengagementletter.Iftheamountis materialthenitshould be takenseriouslybecausetheydonot representthetruth,theinformationmight not be trueandfair.Thisleadsto theauditorqualifying remarksin theauditreport.Whentheinformationis immaterial,theoriginaldocumentshould not be alteredbutshould be broughtto theattentionof management.

Reference

Giove,F.C.(2012).Auditing Essentials.Newburyport: Research &amp Education Association.