This case study is designed to expose students to a variety of conditions that may or may not indicate a fraud has been committed. Consideration must be given to errors that are present in a normal business environment, internal control weakness accepted by management, as well as obtaining an understanding of procedures and their long-range effect on business. Students need to understand the overall control environment and not just deal with individual procedure errors.
Please read all of the requirements carefully. Make sure your paper addresses each item. Please edit and proofread your paper. It represents 25% of your course grade. This assignment is to be completed using only the materials authorized for use in this class. If you have any questions as to what is expected, please contact the instructor.
1. If you were part of the audit team, what additional questions would you ask to gather more audit evidence? . You need to focus on what is most important to this case which is how to improve the process and secondly to render an opinion on whether a fraud has been committed. You must come up with at least 15 relevant questions. You must indicate what you hope to learn from each question (i.e., what is the intent of the question) and to whom the question would be addressed.
Parts 2-3 must be written as a formal audit report. Assume you are writing your report for senior management and the audit committee of the board of directors. There are many different ways to write an audit report. You are free to choose a format which works for you. In addition to the readings and discussion in week 7, you may want to view actual audit reports on www.gao.gov or a state web site and sample audit reports on KnowledgeLeader or AuditNet.
2. What is your overall conclusion concerning the internal controls over the Loom Reclamation Program? In your opinion, has a fraud been perpetrated? If so, what evidence supports the allegation? Is it firm enough to convict the person(s) in court? Please explain the rationale for your conclusions.
3. What are the ten most significant internal controls weaknesses in the Loom Reclamation Program? Give it a lot of thought. You need to write an audit comment for each item which includes your recommendation. When you describe an internal control weakness, make sure your intended audience will be able to understand it (i.e., senior management).