Job costing using client cost sheet; fraud investigation: account Spicer and Rabbit is an accounting firm...

 

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Job costing using client cost sheet; fraud investigation: account Spicer and Rabbit is an accounting firm that specialises in fraud investigation. In May, Jackson Mclnnes, the general manager of Jazz Industries, approached John House, a partner of Spicer and Rabbit, to discuss a problem that has arisen in one of his warehouses. Mclnnes is not sure whether fraud is involved or not, but over the past year there have been a series of unexplained inventory shortages, and he has heard rumours of some warehouse staff selling supplies for cash to friends, at greatly reduced prices. Mclnnes would like Spicer and Rabbit to conduct an investigation to see if there is any evidence of misappropriation. This matter is urgent and Mclnnes would like a final report within the next two weeks. John House agrees to undertake the investigation. He will oversee the project, Christine Miller will manage the project and Graeme Smith will assist. The following labour rates apply: $150 Partner John House 100 Christine Miller Manager 60 Investigator Graeme Smith At the end of each week, every employee of Spicer and Rabbit completes a time sheet online, to account for each hour of their day. The following extracts are taken from time sheets for the three staff involved in the investigation. The Jazz Industries case has been assigned the code 4506B: John House Time Date Case Detail 1 May Initial meeting with McInnes nong 1 hour 4506B 2 hours 3547A Delivery of final report 1 hour Initial meeting with Abox Ltd Briefing meeting with CM and GS 4508F 1 hour 4506B 2 hours З Маy 4506B Review of investigation plan Assessment of review 1 hour 4508F 2408D Report recommendations 1 hour Briefing to police 1 hour 78432S 2 hours Meeting with lawyers Discussion of final report with CM and GS Delivery of final report 4540D 10 May 3 hours 4506B 11 May 4506B 2 hours Christine Miller Date Case Detail Time 1 May 4506B Initial meeting with Mclnnes 1 hour 4506B Briefing meeting with JH and GS Review of investigation plan with GS Delivery of final report On-site review of inventory ordering systems 1 hour 2 May 4506B 2 hours 6592F 4 hours 3 May 4506B 5 hours 4506B Interviews with suppliers 3 hours 6 May 4506B Consultation with GS 2 hours 4506B Interview of key managers 3 hours 4508F Review of transactions 3 hours 9 May 4506B Meeting with GS to review report 2 hours 4508F Computer audit of master files 6 hours 10 May 4506B Discussion of final report with JH and GS 3 hours Graeme Smith Date Case Detail Time 1 May 4506B Briefing meeting with JH and CM 1 hour 2 May 4506B Preparation of investigation plan Review of investigation plan with CM 6 hours 4506B 2 hours 3 May 4506B Initial interviews with warehouse staff 4 hours 4506B Documentation of ordering procedures 4 hours 6 May 4506B Consultation with CM 2 hours Character checks of key employees Checking of supplier history Checking of supplier history 4 hours 2 hours 7 May 4506B 2 hours 4506B Random check of inventory and supplier transactions 6 hours 8 May 9 May Preparation of draft report Meeting with CM to review report 4506B 8 hours 4506B 2 hours 4506B Edit report 3 hours 10 May 4506B Discussion of final report with JH and CM 3 hours Spicer and Rabbit calculate a predetermined overhead rate to cover support staff salaries, office rent, utilities and telecommunication costs, marketing costs, and other costs of running the firm. Professional labour costs make up about 75 per cent of the firm's total operating costs. The anticipated overhead cost for the current year is $4 000 0. Required: 1 Calculate the predetermined overhead rate per dollar of professional labour. 2 Explain how the firm can justify using a single overhead rate to cost each case. 3 Use the information in the time sheets to prepare a client cost sheet for the Jazz Industries investigation, similar to that in Exhibit 6.8. 4 Determine the total cost of the investigation. 5 Spicer and Rabbit operate in a very competitive market and cannot always charge clients prices sufficient to cover the full cost of undertaking a case. In the light of this information: (a) Why would Spicer and Rabbit require staff to fill in detailed time sheets? (b) What use could the partners make of the client cost sheet, and the total cost of the case? (c) How could John House justify undertaking the investigation of Jazz Industries for a loss? Job costing using client cost sheet; fraud investigation: account Spicer and Rabbit is an accounting firm that specialises in fraud investigation. In May, Jackson Mclnnes, the general manager of Jazz Industries, approached John House, a partner of Spicer and Rabbit, to discuss a problem that has arisen in one of his warehouses. Mclnnes is not sure whether fraud is involved or not, but over the past year there have been a series of unexplained inventory shortages, and he has heard rumours of some warehouse staff selling supplies for cash to friends, at greatly reduced prices. Mclnnes would like Spicer and Rabbit to conduct an investigation to see if there is any evidence of misappropriation. This matter is urgent and Mclnnes would like a final report within the next two weeks. John House agrees to undertake the investigation. He will oversee the project, Christine Miller will manage the project and Graeme Smith will assist. The following labour rates apply: $150 Partner John House 100 Christine Miller Manager 60 Investigator Graeme Smith At the end of each week, every employee of Spicer and Rabbit completes a time sheet online, to account for each hour of their day. The following extracts are taken from time sheets for the three staff involved in the investigation. The Jazz Industries case has been assigned the code 4506B: John House Time Date Case Detail 1 May Initial meeting with McInnes nong 1 hour 4506B 2 hours 3547A Delivery of final report 1 hour Initial meeting with Abox Ltd Briefing meeting with CM and GS 4508F 1 hour 4506B 2 hours З Маy 4506B Review of investigation plan Assessment of review 1 hour 4508F 2408D Report recommendations 1 hour Briefing to police 1 hour 78432S 2 hours Meeting with lawyers Discussion of final report with CM and GS Delivery of final report 4540D 10 May 3 hours 4506B 11 May 4506B 2 hours Christine Miller Date Case Detail Time 1 May 4506B Initial meeting with Mclnnes 1 hour 4506B Briefing meeting with JH and GS Review of investigation plan with GS Delivery of final report On-site review of inventory ordering systems 1 hour 2 May 4506B 2 hours 6592F 4 hours 3 May 4506B 5 hours 4506B Interviews with suppliers 3 hours 6 May 4506B Consultation with GS 2 hours 4506B Interview of key managers 3 hours 4508F Review of transactions 3 hours 9 May 4506B Meeting with GS to review report 2 hours 4508F Computer audit of master files 6 hours 10 May 4506B Discussion of final report with JH and GS 3 hours Graeme Smith Date Case Detail Time 1 May 4506B Briefing meeting with JH and CM 1 hour 2 May 4506B Preparation of investigation plan Review of investigation plan with CM 6 hours 4506B 2 hours 3 May 4506B Initial interviews with warehouse staff 4 hours 4506B Documentation of ordering procedures 4 hours 6 May 4506B Consultation with CM 2 hours Character checks of key employees Checking of supplier history Checking of supplier history 4 hours 2 hours 7 May 4506B 2 hours 4506B Random check of inventory and supplier transactions 6 hours 8 May 9 May Preparation of draft report Meeting with CM to review report 4506B 8 hours 4506B 2 hours 4506B Edit report 3 hours 10 May 4506B Discussion of final report with JH and CM 3 hours Spicer and Rabbit calculate a predetermined overhead rate to cover support staff salaries, office rent, utilities and telecommunication costs, marketing costs, and other costs of running the firm. Professional labour costs make up about 75 per cent of the firm's total operating costs. The anticipated overhead cost for the current year is $4 000 0. Required: 1 Calculate the predetermined overhead rate per dollar of professional labour. 2 Explain how the firm can justify using a single overhead rate to cost each case. 3 Use the information in the time sheets to prepare a client cost sheet for the Jazz Industries investigation, similar to that in Exhibit 6.8. 4 Determine the total cost of the investigation. 5 Spicer and Rabbit operate in a very competitive market and cannot always charge clients prices sufficient to cover the full cost of undertaking a case. In the light of this information: (a) Why would Spicer and Rabbit require staff to fill in detailed time sheets? (b) What use could the partners make of the client cost sheet, and the total cost of the case? (c) How could John House justify undertaking the investigation of Jazz Industries for a loss?

Answer rating: 100% (QA)

ANSWER Frud exmintin nd investigtin rvide the essentils fr reslving frud llegtins frm inetin t desitin The rer redures tehniques nd skills must be used t ndut n effetive frud exmintin r investigtin ft... View the full answer