Case Study Audit free essay sample

Furthermore, many competitors of Fast Go’s are larger and have greater financial resources, less average, and their coverage are more extensive. Furthermore, Fast Go also suffer high turnover of staff of the company. It is resulted from the high competition in the industry. Many staff left Fast Go and join bigger companies that offer better pay for them. Besides that, Fast Go also predicts that the market prices will be decline in the future, it just make them unable to attract more customer. And the important thing that cause the substantial doubt in order Fast Go to carry on the business is, the company has debt totaling RM 25 Million. The debt has financial covenants as well as material adverse change clause. Furthermore, Fast Go must maintain Debt Ratio to Total Assets not exceeding 35%. If Fast Go unable to comply with the agreement, they need to pay the loan in full. We will write a custom essay sample on Case Study Audit or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page b) Assuming the events of conditions identified in (a) above cause the audit team to have substantial doubt about Fast Go ability to continue as a going concern, what is the next step the audit team needs to perform? The next step that the audit needs to perform are, the audit team must seek information about management’s plans to mitigate all the problem that Fast Go suffer for example the debt, the competition and etc. Besides, the audit team also must assess the likelihood that such plans can be successfully implemented. Furthermore, the audit team also must consider the Fast Go ability to continue or not. c) What types of audit procedures should be perform by the audit team? Types of audit procedures should be perform by the audit team are, the audit team should analyzing and discussing the Fast Go’s cash flow, profit and other relevant forecasts with the management. They should analyze the latest company’s financial statement. Besides, the audit team also must reviewing the terms of debentures and loan agreement with the bank to ensure that there is no breach of the contract between Fast Go and the bank. Furthermore, they also must enquire the entity’s lawyer regarding the existence of litigation and claims and reasonableness management assessments of their outcomes and the estimate of their financial implications. Another procedure that audit team should take is they have to reviewing the events after period ends in order to identify those that either mitigate or otherwise effect the Fast Go’s ability to continue as going concern. d) What are mitigating factors that Fast Go should implement in order to continue as going concern? Mitigating factors that Fast Go should implement in order to continue as going concern are, Fast Go should consider whether to sell the assets to pay off debt or dispose of the operations that are losing money. Frequently, Fast Go also may develop plan to reduce wages or cut back the workforce. Besides that, Fast Go also may negotiate with the bank or the creditor in order to restructure back the debt or seek for additional financing. Furthermore, they also can reduce the non- added value activities that incurred in their company that makes the bare high cost rather than get high profit. ) What are the responsibilities of the audit team with regard to Fast Go ability to continue as a going concern? Responsibilities of the audit team in order Fast Go to continue as a going concern are, the audit team should be consider the appropriateness of management’s use of the going concern assumption in the preparation of financial reporting. Furthermore, the audit team also must consider the ability of the Fast Go to continue the business and they need to be disclosed in the financial reporting. f) What types of audit report will you issue for Fast Go. Types of audit report that will be issue for Fast Go is unmodified audit report which have to prepare by the management on the going basis after considering all the mitigating factors that arise. Case Study 4 i) Explain the factors that contribute to the success of Mazlan’s fraudulent scheme. You may explain from the perspective of fraud diamond. Based on the fraud diamond, the factors that contribute to the success of Mazlan’s fraudulent scheme are: a) An incentive – It is an incentive for Mazlan to commit fraud when he need to bear the limit credit card and he was on the verge of declaring bankruptcy. Because of this he decided to â€Å"borrow† money from IOPSB. b) Rationalization – Mazlan think what he did is rational because he will try to keep track of the money so he could pay it back later to the company. c) Opportunity- Mazlan has an opportunity to commit fraud when Zairi, the Chief Executive Officer did not play his duty as an officer. He just signed whatever cheques without check the payment is made for whom. d) Capability- Mazlan was also capable to commit fraud because he is Account Executive in that company. So that, it easier for Mazlan to â€Å"borrow† the money from IOPSB. ii) Based on what Mazlan told you about his fraudulent scheme, describe the suggestions would you make to Salim. Suggestion that would be making to Salim are, Salim must discuss with the all management team in IOPSB about what happened. He must tell all staff about it. And in order to recover back the loss, he must ask the audit team and appoint another Account Executive to reconcile back all the account. Furthermore, he must take an action towards Salim because of his fraudulent. Besides, Salim also need no be more aware about this matter and make a segregation of duties among staff. , make sure that all of them carry their own job and responsibilities in accordance with their job description. iii) Explain the situation that had violated the MIA’s By Laws. Under Section 10 (a) of Accountants Act 1967, every member is to observe the standard of professional conduct and refrain from unprofessional conduct that include any act that discredit to himself, other members, and Institute or the accounting profession. Situation that had violated the MIA’s By Laws are: a) Intergrity- Mazlan had violated the MIA’s By Laws which falls under integrity. Integrity means adherence to moral and ethical principles, soundness of moral character or simply honesty. Base on this case, Mazlan had not carry his duty in moral and honesty way or manner when he commit fraud by make a cheque for his own interest. b) Self interest threats- Self interest threat arise from ownership of financial interest. It happened when a firm or members could benefit from financial interest in the assurance company. In this case, Mazlan had violated By Laws when he use all the money from the IOPSB for his own interest. It happened when he need to pay his credit card which reached the limit that may bring him to bankruptcy. c) Due Care- Due Care means the member is responsible for fulfilling his or her duties diligently and carefully. In this matter, Zairi had violate to carry on his professional in due care when he did not check the cheque that get befor he signed and approve it. v) Explain the role of external auditors in contributing to good corporate governance. The role of external auditors in contributing to good corporate governance are,: a) Give unbiased opinion on the financial statement prepared by the management. b) Evaluates whether audit evidence raises doubt about the ability of the client to continue as a going concern in the foreseeable future. c) Auditor must collects evidence to ob tain reasonable assurance that the amounts and disclosures in the financial statements are free of material misstatement. CASE STUDY 5