ACC00718 - Assessment Task Two – Session One 2019
A major Australian Public Company ran promotions advertising for a number of its products through a promotions company. The promotions company falsely inflated the number of responses it received from purchasers of the company’s product. The false number of respondents was invoiced by the promotions company to the public company resulting in the overpayment of thousands of dollars. The records kept by the promotions company were those on its computer database as well as manual batch numbers of responses to the promotions.
Identify five (5) procedures and checks that would have reduced the risk to the victim company?
You were engaged to conduct an examination on an Australian subsidiary of an American company following a discovery by the financial controller that freight and travel expenses were too high during a certain period. You have found the following:
The entries posted to the general ledger were examined and it was found that whereas normal expenses would be $10,000 to $12,000 for a particular month, they were in fact $33,442.19. Entries posted to the freight account were checked and in some cases there were no corresponding invoices.
Staff were frustrated in their efforts because the trade payables clerk, who was responsible for the payment of accounts and cashing of wages cheques, was either off sick or evasive when questioned.
The system for the payment of accounts was that the trade payables clerk would prepare a cheque to pay an invoice and would then present the cheque with the invoice and relevant documents for signing by two authorised signatories.
All company accounts were paid by cheque; the only cheques used to obtain cash were wages cheques. This would be done by stamping the reverse of the cheque with the words, ‘Please pay cash’; the trade payables clerk would then present the cheque to the bank and obtain the cash. Specimen signatures were, of course, held at the bank but they were rarely checked as the trade payables clerk was so well known to bank staff.
Duplicate cheques had been issued for payment of accounts already paid by the company and cashed at the bank by the trade payables clerk. The signatures on the cheques were, in some cases, forgeries and, in other cases, genuine (obviously people were signing things without due care). A payment of $6,217.60 was used to pay a travel company for a trip for two to Tahiti — the clerk had cancelled this entry with the words, ‘OK paid by me’.
When questioned, the trade payables clerk said that she had used her own cheque to pay for the travel. You checked with the travel company and found that, in fact, a company cheque had been used for the trip. You and officials of the company called in local detectives and all parties adjourned to the local police station. By this time, it was outside office hours and police were unable to contact the travel agent themselves and had no documentation to rely on to negate the clerk’s story. The clerk was released for further investigation by them, but the clerk left the country and is now living happily in Greece, $164,000 richer.
1) Identify and discuss which internal control could have prevented this fraud and give five (5) examples
2) Identify and discuss five (5) procedures could have alerted the auditor to the fraud?
Assessment Task Two - Marking Criteria
Marks will be awarded for:
1. Understanding and discussion of the topic (30 marks).
You are expected to answer each of the questions contained in the assignment. You’re answer should fully address the requirements of each question and be in your own words.
Simply restating the contents of the text book, study guide or PowerPoint slides does not show individual understanding of the topic.
Your answers should contain enough discussion on the question so as to clearly demonstrate your understanding of the topic area and provide sufficient detail which answers the questions to a satisfactory level.
There are no minimum word limits placed on assignment questions, however it is expected that most questions will require approximately 50 to 100 words of readable, logical and verifiable information.
2. The extent and depth of research undertaken (-2 marks)
Your answers should show wide reading related to the question being answered. This would extend beyond the textbook to other texts, newspaper and magazines. Specific resources from the Internet could also be used. The Harvard Referencing style is the required referencing style for this assessment. (refer http://scu.edu.au/library/index.php/14). Your assignment should also include a Reference List / Bibliography identifying the extent of the research undertaken. Failure to demonstrate extended research or provide a Reference list can result in the loss of up to 2 marks.
3. Presentation: overall look, format (including page breaks between questions), written content and the inclusion of title page stating your name, student ID, Assessment identification, and due date. (-3 marks)
Your assignment should have a professional presentation with appropriate use of headings and sections and appropriate use of spelling, grammar and referencing. Marks may be deducted for excessive incorrect grammar, spelling and failing to have a page break between questions. Failing to include a Cover Sheet will result in lost marks.
|Learning outcomes||Grading indicator||Min Score||Weight||Length/|
|Short written response||Individual||4, 5||Graded||N/A||30%||Individually determined|
This report brings out a discussion on understanding of steps used by the organisation and audit procedure in order to lower down the discrepancies in process. At the initial stage, a set of procedure and other main steps will be used to reduce the risk to the Australian company (AICPA, 2017). Further, with the help of proper checks, it is important to assert the control the uncertainty that is associated with the transaction for the business promotion. In another scenario, many internal control systems are utilised by the organisation in order to reduce the errors and other frauds that are discussed in the process (AICPA, 2017).
Five procedures and monitor checks has been used to assess and minimise the risk to the victim of the company-
|Return (calculated by ROMI and invested capital)||1,50,000|
|Rate of return||15 percent|
Several internal controls system that would be utilised by the organisation to minimise the errors and fraud in process-
For example- An automated system of invoice approval in organisation is as per the level of delegation. Authorising general ledger will remain an entitlement to the preventive control (Ryan, Doster, Daily, and Lewis, 2018).
There can be five procedures, which can become an alert to the auditor while researching for fraud-
Obtaining of exact schedule for the bank accounts and its reconciliation to the ledger-
From the above assessing report, it is seen that in both the scenarios, the company should surely comply with the effective internal control system so that it can sustain in long run. First scenario clearly lays that the organisation can easily the risk associated with the chance of losing money if the organisation will conduct only one given procedure. One of the best internal control system that can be used by the organisation can be hiring the internal auditors that will finally evaluate certain changes and other problems in framework. AT the end, it is necessary to know that the company should focus on its audit method and other procedure while setting the assertion in order to lower the risk associated. For both the cases given, audit risk model will be used by the organisation.