Reference no: EM132134549

Ch. 7: Control and Accounting Information Systems

On the other hand, the evidence of fraud here seems strong. If this kind of behavior is not penalized, then the perpetrators may be encouraged to do itagain, with future adverse consequences to society.

Should the company have told Jason and Maria the results of the high-level audit?Why or why not?

Whether or not Jason and Maria should have been told the results of the high-levelaudit is also a matter of opinion. The investigative team is apparently trying to keepits agreement to maintain silence by telling as few people as possible what reallyhappened.

On the other hand, Jason and Maria were the ones who first recognizedthe problems; it seems only right that they be told about the outcome.

Many lessons may be drawn from this story.

1. Auditors should view the condition of an organization's control environment asan important indicator of potential internal control problems.

2. Fraud is more easily perpetrated and concealed when many perpetrators areinvolved, and especially when management is involved.

3. Purchasing and payroll are two areas that are particularly vulnerable to fraud.

4. Determining whether fraud has actually occurred is sometimes quite difficult,and proving that it has occurred is even more difficult.

5. Frauds do occur, so auditors must always be alert to the possibility of fraud.

6. Auditors should not accept management's explanations for questionabletransactions at face value, but should do additional investigative work tocorroborate such explanation.