Reference no: EM132926603

Question - Success limited is a privately held company and has been in operation since 1951. The company manufactures home appliances, primarily, televisions, stoves, and refrigerators, which are sold locally and internationally. The company has over 850 employees and generates revenues in excess of $300B dollars. The demand for the company's products has been growing exponentially over the last five years; however, the company facilities are not adequate to meet the increasing demand. The company has also been experiencing accounting issues over the last 18 months and there have been rumors of widespread fraud.

The CEO, Peter Wood, and CFO, Mark Fuller have known each other for over 20 years, they attended the same university and have been good friends since their college freshman year. The CFO is a very shrewd and charismatic individual who believes in cutting costs and maintaining a lean workforce, especially administrative support staff. The CEO, Peter Wood, shares the philosophy of the CFO, accordingly, despite the increase in sales over the last three years the size of the corporate staff (HR, Accounting, Legal, and Compliance) has remained the same.

The organization has an employee hotline, whereby, staff can anonymously report issues, thus, preventing retaliation from managers or coworkers. Recently, the hotline has been inundated with allegations of widespread fraud within the accounts payable and purchasing department. At least one of the allegations states that the Purchasing Manager, Debbie Washington, has defrauded the company in excess of $250,000, by misusing her authority and creating fictitious vendors. The CEO is concerned about the allegations as the company is currently in the process of an initial public offering (IPO). Hence, if all goes well with the IPO, Success limited would transition to a publicly-traded company. Accordingly, the CEO needs to ensure that the fraud allegations are properly resolved.

To address the allegation of widespread fraud the CFO hires Anderson LLC, a CPA firm to perform an audit of the company's financial statements for the year ended December 31, 2020. Since Success Limited a privately held company, there is no legal requirement for the organization to have a yearly financial stamen audit. Accordingly, no financial audit has been executed over the last 10 years.

REQUIREMENTS -

You are an Audit Manager with Anderson LLC, a Public Accounting firm, assigned to execute the financial statement audit of Success Limited as of December 31, 2020.

-Why accounts payable is prone to fraud?

-What are three different fraud schemes that may be applicable to accounts payable and

-What are the type of control that could be embedded in the internal control infrastructure to minimize or prevent the occurrence of such schemes.

-For each of the fraud schemes identified detail the step-by-step procedures that the external auditor could execute to uncover the fraud.