Page 3 of 6 cial Check report - thing Cause mim, d who did i to...

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Page 3 of 6 cial Check report - thing Cause mim, d who did i to FOWG QUESTION THREE accord to-ethical value plated You are the main auditor of Mold Holdings, a listed company, which has subsidiaries in Zambia and overseas, many of which are audited by other firms. All subsidiaries are involved in the manufacture or distribution of plastic goods and have accounting periods coterminous with that of the holding company. Required: Significand- Fim of the process (a) (b) (c) (5 marks) Describe a significant component in group audit State the reasons you would wish to review the work of the auditors of the subsidiaries not audited by you. (10 marks) Describe the principal audit procedures you would carry out in performing such a review. Car Cap QUESTION FOUR (a) Define the following terms: (i) Forensic Accounting; (ii) Forensic Investigation; (iii) Forensic Auditing. (10 marks) delou (Total: 25 marks) Compe Fried (6 marks) Anl Ayiz dr You are a manager in the forensic investigation department of your audit firm. The directors of a local manufacturing company, Crocus Co, have contacted your department regarding a suspected fraud, which has recently been discovered operating in the company, and you have been asked to look into the matter further. You have held a preliminary discussion with Gita Tembo, the finance director of Crocus Co, the notes of this conversation are shown below: Notes of discussion with Gita Tembo asse brought Correc ay. assi IFS Four months ago Crocus Co shut down one of its five factories, in response to deteriorating market conditions, with all staff employed at the factory made redundant on the date of closure. While monitoring the monthly management accounts, Gita performs analytical procedures on salary expenses. She found that the monthly total payroll expense had reduced by 3% in the months following the factory closure - not as much as expected, given that 20% of the total staff of the company had been made redundant. Initial investigations performed last week by Gita revealed that many of the employees who had been made redundant had actually remained on the payroll records, and salary payments in respect of these individuals were still being made every month, with all payments going into the same bank account. As soon as she realized that there may be a fraud being conducted within the company, Gita stopped any further payments in respect of the redundant employees. She contacted our firm as she is unsure how to proceed, and would like our firm's specialist department to conduct an investigation. Gita says that the senior accountant, Miles Rutland, has been absent from work since she conducted her initial investigation last week, and it has been impossible to contact him. Gita believes that he may have been involved with the suspected fraud. Gita has asked whether your department would be able to provide a forensic investigation, but is unsure what this would involve. Crocus Co is not an audit client of your firm. Required: (b) Prepare a report to be sent to Gita Tembo (the finance director), in which you: Describe the objectives of a forensic investigation; and (i) (3 marks) (ii) Explain the first TWO steps involved in a forensic investigation into the payroll fraud (6 marks) Page 3 of 6 cial Check report - thing Cause mim, d who did i to FOWG QUESTION THREE accord to-ethical value plated You are the main auditor of Mold Holdings, a listed company, which has subsidiaries in Zambia and overseas, many of which are audited by other firms. All subsidiaries are involved in the manufacture or distribution of plastic goods and have accounting periods coterminous with that of the holding company. Required: Significand- Fim of the process (a) (b) (c) (5 marks) Describe a significant component in group audit State the reasons you would wish to review the work of the auditors of the subsidiaries not audited by you. (10 marks) Describe the principal audit procedures you would carry out in performing such a review. Car Cap QUESTION FOUR (a) Define the following terms: (i) Forensic Accounting; (ii) Forensic Investigation; (iii) Forensic Auditing. (10 marks) delou (Total: 25 marks) Compe Fried (6 marks) Anl Ayiz dr You are a manager in the forensic investigation department of your audit firm. The directors of a local manufacturing company, Crocus Co, have contacted your department regarding a suspected fraud, which has recently been discovered operating in the company, and you have been asked to look into the matter further. You have held a preliminary discussion with Gita Tembo, the finance director of Crocus Co, the notes of this conversation are shown below: Notes of discussion with Gita Tembo asse brought Correc ay. assi IFS Four months ago Crocus Co shut down one of its five factories, in response to deteriorating market conditions, with all staff employed at the factory made redundant on the date of closure. While monitoring the monthly management accounts, Gita performs analytical procedures on salary expenses. She found that the monthly total payroll expense had reduced by 3% in the months following the factory closure - not as much as expected, given that 20% of the total staff of the company had been made redundant. Initial investigations performed last week by Gita revealed that many of the employees who had been made redundant had actually remained on the payroll records, and salary payments in respect of these individuals were still being made every month, with all payments going into the same bank account. As soon as she realized that there may be a fraud being conducted within the company, Gita stopped any further payments in respect of the redundant employees. She contacted our firm as she is unsure how to proceed, and would like our firm's specialist department to conduct an investigation. Gita says that the senior accountant, Miles Rutland, has been absent from work since she conducted her initial investigation last week, and it has been impossible to contact him. Gita believes that he may have been involved with the suspected fraud. Gita has asked whether your department would be able to provide a forensic investigation, but is unsure what this would involve. Crocus Co is not an audit client of your firm. Required: (b) Prepare a report to be sent to Gita Tembo (the finance director), in which you: Describe the objectives of a forensic investigation; and (i) (3 marks) (ii) Explain the first TWO steps involved in a forensic investigation into the payroll fraud (6 marks)