a) There was a large amount of expenses on the company credit card for personal travel purposes. A further investigation showed that all staff members were allowed to hold a company credit card and use it without management approval.

(i) What type of fraud is it? Using the fraud triangle, identify and explain the fraud risk factor.

(ii) In this case, identify and explain the responsibilities of the client’s management and auditors for the fraud.

b) You are one of the partners in the accounting firm B&C partners. The firm has a large client, Koala Ltd, for which your firm has carried out a range of taxation, consultancy, audit and other assurance services. The firm now obtains significant fee income from Koala. An amount is still outstanding for work carried out earlier in the year in relation to consulting advice given to Koala about internal controls around its new purchase ledger system that was implemented during the year.

(i) Identify and explain two possible threats to audit independence and its potential breach of ethical principles.

(ii) For each threat, explain any safeguards that could be put in place to reduce the threat to an acceptable level.

Answer rating: 100% (QA)

aMisappropriation or embezzlement of cash Misappropriation means wrongful conversion or fraudulent a... View the full answer