How Control Weaknesses Can Lead to Fraud

How Control Weaknesses Can Lead to Fraud

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In
your Discussion, you will be faced with a potentially fraudulent
situation. This is something that you might face in your auditing career
as well. How would you handle these types of difficult situations?

You
are auditing the internal controls of the Kemmons Corporation and you
have found several material weaknesses in their system. You discuss the
internal control weaknesses with the president. He states that he will
make the necessary changes personally and tells you that there is no
need to tell the board about the weaknesses. He does not want to bother
the busy board members with these details, and he states the board is
only involved with major items such as policy changes.

  • As a new auditor, how would you respond to the president?
  • If you were the audit partner on this engagement, would your response change? Why or why not?

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