management functions and the audit, Auditing

Describe the management system within your case study business. Assess the risk of fraud in this business, and suggest methods for detection

Management system in this case study.

It is a private ltd company to which owns a large restaurant also a cafe and gateway management at executive level includes. To director David, responsible for financial side of the business and Linda is also a Director involved in day to day running of business. Sue and Lisa are two managers, besides this they hire casual employees during summer reason being they are running seasonal business and during people bossiness months they have to fire employee on temporary basis but still 15 employee are on their Payroll and most of them are two years old.

Risks of fraud

Management system described earlier status position of the two directors and there responsibilities if we look into system deeply it is evident that management system is week. Controls are not properly designed, implemented and if somewhere there are implemented leaving a loophole for concealment that is found.

1. Risk in sales, business is having seasonal sale and the rest of the period business is not doing well so it could be the intention to show a regular sale or cash based sales is also a risky area. Leading to fraud automatic link for credit card payments to directly transfer the amount in company bank account so indirect check is lacking there due to absence of control implemented by management creating an opportunity for fraud.

2. Software used for recording the transaction is open to use by any body, again absence of controls by management creating opportunity for fraud.

3.  Different suppliers could also be exposed to fraud.

4.  If there is no reconciliation for sale receipts is available. Then if should be an intentional concealment.

5.  Proper sales supporting documents are not available.

6.  Evaluation of fraud risk factors

The auditor shall evaluate weather information obtained from other risk assessment procedures and related activities performed indicates that one or more fraud risk factors are present while fraud risk factors may not reasonable indicate existence of fraud they have often been present in circumstances where fraud have occurred therefore may indicate risk of material misstatement due to fraud.

Risk assessment procedures performed for detection of fraud are.

1.  Inquires of management

2.  Discussion with those charged with Government

3.  Universal and unexpected relationships identified through analytical procedures.

In this case study absence of supporting sale documents, receipts and follows ups suspects frauds. Charging fixed assets in profit and loss account as expense is an error but if it is not properly valued and directs management assertions like valuation correctness, existence etc. then it would an intentional concealment.

Ineffective Controls includes

  1. Ineffective control for recording and maintenance record of sale and purchase transaction and ineffective monitoring suspects fraud.
  2. Incompetent personal hired, it could be ineffective HR policies.

Method for detection

Fraud is suspected at management assertions level and class of transaction so audit risk assessment proceedings includes:

1- inquiries to management

2- Discussion with internal auditors and understanding internal controls

3- Analytical procedures

4- Inspection and observations

These are procedures used by the auditors to detect fraud.

Posted Date: 3/14/2013 2:37:17 AM | Location : United States

Related Discussions:- management functions and the audit, Assignment Help, Ask Question on management functions and the audit, Get Answer, Expert's Help, management functions and the audit Discussions

Write discussion on management functions and the audit
Your posts are moderated
Related Questions
IAS 36 Impairment of Assets It is very necessary for the auditor to determine the client's method for determining and accounting for impairments.  Corresponding IAS 36, 'impai

What is an audit, what financial records are available and what is their individual function in completing your audit? Audit is an independent examination of financial informat

Verification Procedures - Investment Verification actions should follow the common approach outlined in favor of tangible noncurrent assets. Conversely the following particula

1. Why is studying Auditing different from studying other accounting topics? 2. How might understanding auditing concepts prove useful for consultants, business managers, and other

Question: Part A (i) List and define five audit procedures for obtaining audit evidence. (ii) Why is it necessary to obtain corroborating evidence for inquiry and obser

Taxation - Audit Process Companies suffer corporation tax. The Companies Act use that corporation tax payable on the profits of any specific year should be matched against tho

I have a auditing case study i need to complete in chapter 8 of Auditing & Assurance service (fifteenth edition) by Alvin A. Arens, Randal J. Elder and Mark S. Beasley. I don''t kn

main areas contained in a private audit

Problem: "If the auditor wishes to place reliance on internal control,he should ascertain and evaluate those controls and perform compliance tests on their operation" (a) De

Process to Adopt Liabilities It is significant that the auditor realises which such liabilities can exist and he should obtain reasonable steps to unearth them whether they ex