a. List the risks of error or fraud that are present at Kowal Manufacturing. For each risk, state the type of misstatement that could occur.
b. State whether the fraud risk could lead to misappropriation of assets or fraudulent financial reporting. Explain how these frauds could take place.
c. For each risk of error or fraud, provide both preventive and detective controls to prevent or detect the fraud.
You are assessing internal control in the audit of the human resources and payroll cycle for the Kowal Manufacturing Company, a company specializing in assembling computer systems from purchased parts. Kowal employs approximately two hundred hourly and thirty salaried employees in three locations. Each location has one foreman who is responsible for overseeing operations. The owner of the company lives in Victoria, B.C., and is not actively involved in the business. The two key executives are the vice president of sales and the controller, both of whom have been employed by the company for more than fifteen years.