ACCA AAA ^INT Syllabus F. Other Assignments - Forensic auditing and Ethics - Past Papers ^{3 / 3}

The audit committee of the Group has contacted Kennel & Co to discuss an incident that took place on 1 June 2013. On that date, there was a burglary at the Group’s warehouse where inventory is stored prior to despatch to customers. CCTV filmed the thieves loading a lorry belonging to the Group with boxes containing finished goods. The last inventory count took place on 30 April 2013.

The Group has insurance cover in place and Kennel & Co’s forensic accounting department has been asked to provide a forensic accounting service to determine the amount to be claimed in respect of the burglary. The insurance covers the cost of assets lost as a result of thefts.

It is thought that the amount of the claim will be immaterial to the Group’s financial statements, and there is no ethical threat in Kennel & Co’s forensic accounting department providing the forensic accounting service.

Required:

In respect of the theft and the associated insurance claim:

(i) Identify and explain the matters to be considered, and the steps to be taken in planning the forensic accounting service; and

(ii) Recommend the procedures to be performed in determining the amount of the claim.

Note: The total marks will be split equally between each part. (12 marks)

You are a manager in Beck & Co. an audit firm. Your firm performs the audit of Jarvis Co, a company which installs windows. Jarvis Co uses sales representatives to make direct sales to customers. The sales representatives earn a small salary, and also earn a sales commission of 20% of the sales they generate.

Jarvis Co’s sales manager has discovered that one of the sales representatives has been operating a fraud, in which he was submitting false claims for sales commission based on non-existent sales. The sales representative started to work at Jarvis Co in January 2012. The forensic investigation department of your firm has been engaged to quantify the amount of the fraud.

Required:

Recommend the procedures that should be used in the forensic investigation to quantify the amount of the fraud. (4 marks)