The IIA Research Foundation, Case Studies in Internal Auditing

The IIA Research Foundation Case Studies in Internal Auditing essay assignment help

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. Control weaknesses by themselves are not major problems. The combination of the control weaknesses, coupled with the inexperience of the internal auditor and a limited audit budget present real life situations. Students need to understand the overall control environment and not just deal with individual procedure errors.

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Control weaknesses by themselves are not major problems. The combination of the control weaknesses, coupled with the inexperience of the internal auditor and a limited audit budget present real life situations.  For example does the auditor know when to expand an audit test, discontinue tests, and ask for additional data.  What information is needed, who should respond, and what reliability should be placed on the information?  Does the auditor know what is necessary to support an audit recommendation or, more importantly, to provide evidence in a criminal case?

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Please read all of the requirements carefully. Make sure your paper addresses each item.  You are strongly encouraged to include an appendix with some of the supporting tools covered in this course such as a process map/flowchart.  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. You must come up with at least 15 relevant questions.  You must have some questions for each of the five areas: receiving, loom teardowns, customer orders, disposal of residues and scrap metal, and administration of the loom reclamation program. 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.

The IIA Research Foundation, Case Studies in Internal Auditing

2) Create a Swim Lane (Rummler-Brache) diagram for the processes described in the case.

I provided some references for you in case you are not familiar with this type of diagram. On the diagram indicate the risks and controls using pages 6-7 of the Process Documentation Narrative and Flow Chart Guide as an example.

a) http://www.mindtools.com/pages/article/newTMC_89.htm

b) http://www.conceptdraw.com/examples/swim-lane

c) Process Documentation Narrative and Flow Chart Guide pages 6-7http://www.knowledgeleader.com/KnowledgeLeader/Content.nsf/Web+Content/ChecklistsGuidesProcessDocumentationGuide!OpenDocument

3. Identify your top four internal control weaknesses in order of materiality in each the following five areas (total of 20 in all): receiving, loom teardowns, customer orders, disposal of residues and scrap metal, and administration of the loom reclamation program. Please make sure you address the most important control weaknesses.  When you describe a control weakness, make sure that your intended audience (i.e., management) would be able to understand it.

4. For each observation identified in #3, write your recommendation(s) to strengthen internal controls over the Loom Reclamation Program. Make sure each recommendation is clearly associated with an observation(s) from #3. One recommendation can cover several internal control weaknesses.

5. In your opinion, has 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.