a. Explain how the fundamental principles of the IESBA Code of Ethics apply to forensic assignments. (5 marks) b. You are a manager in the forensic investigation department of an audit firm. You have been approached by the financial director of Arnold Co to investigate a fraud. The finance director has identified a number of discrepancies between inventory records and the quarterly physical inventory counts which are performed. Their suspicions have been increased by the fact that the discrepancy always relates to the same product line and approximately the same number of items appear to be missing each time. Required Explain the procedures you would perform to determine whether a fraud has taken place and to quantify the loss suffered by the company. (5 marks) c. The purchase ledger clerk of Painswick Ltd has been channelling payments to suppliers into their own bank account by altering bank account details of the relevant suppliers on the BACS masterfile. In order to disguise this activity the purchase ledger clerk has: Posted the relevant invoices to the purchase ledger twice; one entry has been made correctly to the relevant expense account while the other has been debited to a suspense account Matched and removed the duplicate invoices and payments before the monthly reconciliation of supplier accounts is performed Required Based on the above example of a fraud, identify the procedures which would have enabled the forensic auditor to identify this fraud and quantify the loss to the company. (5 marks)
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Madhur L.
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An accountant with the Atlanta Olympic Games was charged with embezzling over $60,000 to purchase a Mercedes-Benz and to invest in a certificate of deposit. Police alleged that he created fictitious invoices from two companies that had contracts with the Olympic Committee: International Protection Consulting and Languages Services. He then wrote checks to pay the fictitious invoices and deposited them into a bank account he had opened under the name of one of the companies. When he was apprehended, he cooperated with police to the extent of telling them of the bogus bank account and the purchase of the Mercedes-Benz and the CD. The accountant was a recent honors graduate from a respected university who, supervisors stated, was a very trusted and loyal employee. a. How does the accountant fit the profile of a fraudster? How does he not fit the profile? b. What fraud scheme did he use to perpetrate his fraud? c. What controls could have prevented his fraud? d. What controls could have detected his fraud?
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