(b) Smith has been accepted to join the internal audit department of Super Computer Services Co (SCS), an IT Technology Company. After working with SCS for three years, Smith has identified the following unresolved issues:

Issue 1

The company is facing financial difficulties due to frequent technological updates on the products. Dato Kenneth, the companys director has force Fiona to revise some of the figures in the company's account in order to show a favorable profit. This is because the director wants to apply a long-term loan from one of the local banks and makes all the projects become viable. In return, Dato Kenneth promises to promote Fiona a higher position in the company for next manager voting. Dato Kenneth is actually Fionas uncle.

Issue 2

There is no proper authorization and approval of transactions towards all activities done by the staff of SCS. Documents and records are not properly kept and no independent checks are done by the designated person. Apart from that, Smith also found that the companys financial planning controller position is still idle for the past three months.

Required:

i. Define fraudulent financial reporting and describe fraud triangle.

(4 marks)

ii. By referring to above case, identify and explain several indicators of fraudulent activities that has been highlighted in the issues raised by Smith.

(8 marks)