LECTURER: MR. MEGAT ABDULLAH MEGAT MAHMUD
Table of Contents
Different roles of internal and external auditors.4
Identify the benefits in forming an audit committee.6
Evaluate the strengths and weaknesses of MPL’s control environment:7
a.Integrity and Ethical Values:7
b.Participation of Board of Directors or Audit Committee:7
c.Management Philosophies and Operating Style:7
e.Assignment of Authority and Responsibility:8
f.Human Resource Policies and Practices:8
Strengths of MPL’s Control Environment:8
Weaknesses of MPL’s Control Environment:9
Discuss the factors in MPL control environment that have led to and facilitated Mike’s manipulation of inventory.9
a.Human Resource Policies:10
b.Participation of Board of Directors or Audit committees:10
Analyse the audit procedures which the auditors apparently did not follow that could have detected Mike’s fraudulent increase of inventory.11
a.Maintain professional skepticism11
b.Hold discussions among the engagement team11
c.Conduct risk assessment procedures and related activities11
d.Making inquires of management and others within the entity:11
e.Performing Analytical procedures:12
f.Evaluating fraud risk factors:12
The implication to an auditor, whose failure in detecting material fraud as described here.14
Areas of concern which the auditors should take up with the client’s audit committee, if one is formed in the future.15
Recommendation to an audit committee:16
I would like to thank various people who have made contributions and helped us in making this report. Without their effort the success of the report would not have been possible. We would like to thank Asia Pacific University College of Technology and Innovation for giving such type of opportunities to us, and thanking them also by helping us to explore our new ideas and learn more about the different organizations. Secondly I would like to thank Mr. Megat Abdullah Megat Mahmud in helping me in finishing of the assignment.
Different roles of internal and external auditors.
A person who verifies company’s operations and also an employee of a company is known as internal auditor. An internal auditor looks at the overall goals of the company and helps them do extremely well in a reliable and ethical manner. They evaluate and improve the company's systems of compliance, control, and risk assessment. An internal auditor's primary function is to evaluate and improve the company's finances and accounting procedures. The internal auditor may make suggestions on how to better safeguard this information from being accessed by persons other than necessary personal.
A person who verifies company’s operations but not an employee of a company is known as external auditor. External auditors are not part of the organization, but are engaged by it, and their primary mission is to provide an independent annual opinion on the organization's financial statements. Even though they are not part of the organization, they play a key role in developing internal control. They provide a statistical analysis on the clarity and effectiveness of the accounting policies put in place by the company. They also help management become aware of evidence that may affect future audits. Auditors can comment on weaknesses in the accounting records, systems and controls that they review in the audit. They can give advice management through recommendations in their audit notes or discussions.
Identify the benefits in forming an audit committee.