Managements Responsibility how Control Weaknesses Can Lead to Fraud Paper

Managements Responsibility how Control Weaknesses Can Lead to Fraud Paper

In your Discussion, you will be faced with a potentially fraudulent situation. This is something that you might face in your auditing career as well. How would you handle these types of difficult situations?

You are auditing the internal controls of the Kemmons Corporation and you have found several material weaknesses in their system. You discuss the internal control weaknesses with the president. He states that he will make the necessary changes personally and tells you that there is no need to tell the board about the weaknesses. He does not want to bother the busy board members with these details, and he states the board is only involved with major items such as policy changes.

• As a new auditor, how would you respond to the president?
• If you were the audit partner on this engagement, would your response change? Why or why not?

Just do response each posted # 1 to 3 down below only

Posted 1

It is managements responsibility to establish internal controls with what i find with these internal procedures and process. This will have be to addressed in letter to management regardless when the changes are made. Engagement managers are required to report weakness to the clients management, so the letter will also be provided to the internal audit committee. When you have weak internal control, you put everybody at risk. Inefficiencies and employee theft can be damaging.

As an audit partner, i would still inform the board of directors and management of my findings including weaknesses and give recommendations for improvement for the companies internal controls.

Posted 2

Auditors have a tough job because you want to do your job which usually involves telling people things they don’t want to hear or making them do more work than they want to do. This would be even harder as a new auditor because you don’t want to ruffle feathers at a new company. If I was the auditor, I would tell the president that even though the board is busy these are the types of things they want to know about. I would try to sell it to the president as he can show the board how much improvement he can do over the next year to make himself look good. If I didn’t feel comfortable doing that I would bring in a senior auditor to help talk to the president. As the audit partner I would insist that the board be informed because the integrity of the company is on the line. Either way the president should not have the ability to hide deficiencies of the company’s accounting practices.

Vitez, O. (2019, February 11). What Are the Duties of an Audit Partner? Retrieved from https://bizfluent.com/list-6077541-duties-audit-partner-.html

Posted 3

Good evening classmates,

You are auditing the internal controls of the Kemmons Corporation and you have found several material weaknesses in their system. You discuss the internal control weaknesses with the president. He states that he will make the necessary changes personally and tells you that there is no need to tell the board about the weaknesses. He does not want to bother the busy board members with these details, and he states the board is only involved with major items such as policy changes.

As the auditor, we have learned that when we find potential issues, we need to notify the next higher level of management. If we cannot go higher, then we should seek legal counsel. An auditor is required to report all deficiencies to management (Pany & Whittington, 2016, p. 286). If the president is the proper level of management to notify, then we have done our job correctly. All of these notes will be kept in the working papers, and the recommended changes should ne noted in the auditor’s report. The problem could arise if the issue was with the president, and he did not want you going to the proper level of management. If that was the case, I would start to suspect fraud on the president’s behalf that they are trying to conceal. I do not work for the president, I work for the auditing firm. If the board is the next level that needs to be notified, then I have that duty to perform my job correctly and notify the board of the needed changes. It is also very important as a new auditor to have communications with your auditing firm, and never be afraid to ask questions or having something clarified by the auditing firm.

As an audit partner, I am still bound to perform the audit correctly and it is my responsibility as a partner to ensure that an audit is performed within the professional standards (Pany & Whittington, 2016, p. 21). I would still suspect that the president may be trying to conceal something by not wanting the board to be made aware of the internal control weaknesses. It would also be my responsibility as a partner to ensure that the president of the company cannot interrupt or attempt to influence our audit. We must remain skeptical and independent.