You are a forensic accountant hired by a law firm to investigate a case of financial fraud
Question:
You are a forensic accountant hired by a law firm to investigate a case of financial fraud at a non-profit organization. The non-profit organization receives donations from the public and government grants. Your task is to analyze the financial statements of the non-profit organization and determine if any fraudulent activity has taken place.
Using the information provided, answer the following questions:
a) The non-profit organization's financial statements show a total revenue of $500,000 for the year ending December 31, 2022. However, during your investigation, you find that the organization received an additional donation of $50,000 in cash that was not recorded in the financial statements. Calculate the impact of the additional donation on the organization's net income. (5 marks)
b) During your investigation, you discover that the non-profit organization has been overstating its expenses by recording expenses twice. The total amount of overstated expenses is $20,000. Calculate the impact of the overstated expenses on the organization's net income. (5 marks)
c) The non-profit organization received a government grant of $100,000 to fund a specific project. The grant specifies that the funds can only be used for the project and any unused funds must be returned to the government. During your investigation, you discover that the non-profit organization has used $20,000 of the grant funds for a different project. Calculate the impact of the unauthorized use of the grant funds on the organization's net income. (5 marks)
d) Based on your analysis, do you believe that financial fraud has taken place at the non-profit organization? Explain your answer. (5 marks)
Auditing An International Approach
ISBN: 978-0071051415
6th edition
Authors: Wally J. Smieliauskas, Kathryn Bewley