Andy Wiltshireis the accounts payable manager ofHomestead Property Ltd (HPL). Andy started withHPL asanaccounts clerkand workedhis wayup
Question:
Andy Wiltshireis the accounts payable manager ofHomestead Property Ltd (HPL).
Andy started withHPL asanaccounts clerkand workedhis wayup to his current management position. He was promoted due to his dedication to the company and his reliability - he often works evenings and weekends, rarely calls in sick, and he never takesvacations.
Despiteearning a goodsalary,Andy enjoys living large, and the majority of hisearnings goes to pay for his luxury car and designer clothes.He finds himselflivingpaycheque to paychequeand has no savings for retirement or emergency purposes.
HPL had alonghistory of profitability and had establisheda bonus scheme to reward its employeeswhen profit targets were made.However, at the end of 20X1, employeeswere shocked whenHPLannounced it hadits worst year in the company's history.Its losses were significant and the companyinstituted significant lay-offs in an attempt to turn this situation around.Theaccounting department's staffing was reduced by 35%, and the remaining staff was asked to do more.Andynowfoundthatnot onlyis he managing an unhappy accounts payable group, heis also now signing cheques, processing payables, and reconciling the bank account. This meantAndyis required to work even more without any pay increase or bonus in sight.
For the first time in his career atHPL,Andyis unhappy. While heis fearful offurther lay-offs, he also feels unappreciated and after all of his hard work, heis unhappy heis being asked to do more.He is also very worried that if he himself was laid off, his prospects of getting a similar job were bleak as he did not have an accounting qualification and his age may be a liability.
Required
- Explain the external auditors' responsibilities in relation to the prevention and detection of fraud and error. (2 marks)
- Discuss the incentives, opportunities, and rationalizations to commit fraud in this case. (6 marks)
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt