Question

Fraud Case 5-1 uppe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, audi- tors would come to do a physical count of the inventory at each warehouse. Recently, Rae's brother started his own drilling company and persuaded Rae to "loan” him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. "Send me over 80 joints of 5-inch pipe tomorrow, and I'll get them back to you ASAP," said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a “no-exception” report Requirements 1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice? 2. How would this kind of action affect the financial performance of the company?

Answer 1

Ans. 1 : Auditors can do the following things in the future to detect this kind of fraudulent practice :

* Plan a surprise visit of the company for the physical count of the inventory.

* To check the documentations and invoices of stock.

* To check CCTV camera coutages on a sample day basis.

* Auditors should follow relevant standards on auditing.

Ans. 2 : This kind of actions can effect the financial position of company in following ways:

* Auditors will qualify the audit report which means the financial of the company does not provide a true and fair view.

* As a result investors will take there investment back from the company.

* Future perspective of the company will come as stake.