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    Analou R. Ruiz - Unit 4 Learning Activity

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    Gia Serilla
    This document provides a case study for an auditing class. It describes an audit conducted by Brava & Campos of Camia Tire Wholesale Company. The auditors found that 30 purchase transactions were recorded and paid without receiving reports. When confronted, the chief accountant Antonio promised to provide the missing reports. However, Antonio was actually diverting shipments for personal profit through a fraudulent scheme involving a personally leased warehouse. The internal auditor later discovered Antonio had overstated inventory by $200,000 through this fraud.

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    Analou R. Ruiz - Unit 4 Learning Activity

    Uploaded by

    Gia Serilla
    190 views3 pages
    This document provides a case study for an auditing class. It describes an audit conducted by Brava & Campos of Camia Tire Wholesale Company. The auditors found that 30 purchase transactions were recorded and paid without receiving reports. When confronted, the chief accountant Antonio promised to provide the missing reports. However, Antonio was actually diverting shipments for personal profit through a fraudulent scheme involving a personally leased warehouse. The internal auditor later discovered Antonio had overstated inventory by $200,000 through this fraud.

    Original Title

    Analou r. Ruiz - Unit 4 Learning Activity(1)

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    This document provides a case study for an auditing class. It describes an audit conducted by Brava & Campos of Camia Tire Wholesale Company. The auditors found that 30 purchase transactions were recorded and paid without receiving reports. When confronted, the chief accountant Antonio promised to provide the missing reports. However, Antonio was actually diverting shipments for personal profit through a fraudulent scheme involving a personally leased warehouse. The internal auditor later discovered Antonio had overstated inventory by $200,000 through this fraud.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    190 views3 pages

    Analou R. Ruiz - Unit 4 Learning Activity

    Uploaded by

    Gia Serilla
    This document provides a case study for an auditing class. It describes an audit conducted by Brava & Campos of Camia Tire Wholesale Company. The auditors found that 30 purchase transactions were recorded and paid without receiving reports. When confronted, the chief accountant Antonio promised to provide the missing reports. However, Antonio was actually diverting shipments for personal profit through a fraudulent scheme involving a personally leased warehouse. The internal auditor later discovered Antonio had overstated inventory by $200,000 through this fraud.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Introduction to Auditing

    “Not intended for publication. For classroom instruction purposes only”.


    Introduction to Auditing

    Name: _Analou R. Ruiz___________________


    Class Schedule: _TTH 4:00-5:30 PM________

    Learning Activities

    Directions: Read and analyze the following statements and write your thoughts about it. Submit
    your work in the pigeon boxes which are provided in your department/college, or to google class
    on or before the date as reflected in your study schedule. See Rubrics in appendix. You may
    also access the rubrics in the classwork section in the google classroom.

    Case 1

    Brava & Campos, a large regional CPA firm, was engaged by the Camia Tire Wholesale
    Company to audit its financial statements for the year ended January 31. Brave & Campos had
    a busy audit engagement schedule from December 31 through April1, and they decided to audit
    Camia’s purchase voucher and related cash disbursement on the sample basis. They instructed
    staff auditors to select a random sample of 300 purchase transactions and gave directions
    about the important deviation, including missing receiving reports. Blanco, the assistant in
    charge, completed the working papers, properly documenting the fact that 30 of the purchase in
    the sample had been recorded and paid without the receiving reports (required by stated
    internal control procedure) being included in the file of supporting documents. Campus, the
    partner in direct charge of the audit, showed the findings to Antonio, Camia’s chief accountant.
    Antonio appeared surprised but promised that the missing receiving reports would be inserted
    into the files before the audit was over. Campos was satisfied, noted in the workpapers that the
    problem was solved, and did not say anything to Brava about it.
    Unfortunately, Brava & Campos did not discover the fact that Antonio was involved in a
    fraudulent scheme in which he diverted shipments to a warehouse leased in his name and sent
    the invoices to Camia for payment. He then sold the tires for his own profit. Internal auditor
    discovered the scheme during a study of slow-moving inventory items. Camia’s inventory was
    overstated by about P200,000- the amount Antonio has diverted.

    Required:

    a. Did Antonio’s activity amount to an error or an irregularity? Were any related party
    transactions involved? Explain

    The activity done by Antonio appears to be an irregularity and also a fraud. Antonio
    knew that he had violated the appropriate procedure for that situation. His intentions
    were clear, which is to perform a fraudulent scheme and benefit from it, alone.
    Related party transactions involved in the case and the business are the following:
    purchase transactions to which 30 of it were recorded and paid with no supporting
    documents, the sale of tires and the use of property leased in his name, but paid by
    Camia.

    “Not intended for publication. For classroom instruction purposes only”.


    Introduction to Auditing

    b. With regard to the 30 missing receiving report, does a material weakness in internal
    control exist? If so, does Brava & Campos have any reporting responsibility? Explain
    The 30 missing receiving report could pose a material weakness in internal control.
    Though these are only supporting documents, but required by stated internal control
    procedure means that they hold a certain significance. It could be considered as other
    deficiency and not material, however a number of 30 is large. It could be a factor
    announcing the occurrence of error or a fraud, especially the latter. Furthermore, Brava
    & Campos would have to report the occurrence as it was relevant and doubtful.

    c. Was the audit conducted in a negligent manner? Explain.


    Yes, it could be said that there was negligence in the part of the auditors. Campos,
    the partner in direct charge of the audit settled with the assurance given by Antonio and
    concluded the audit without consulting Brava. And though it wasn’t mentioned, Brava
    was probably aware about the missing receiving reports but chose to let Campos deal
    with it. Although the risk of the auditor not detecting material misstatement resulting from
    management fraud is high, the auditors immediately dismissed their chance of finding it
    out. They could have done further audit, including asking Camia for the missing
    receiving report instead of settling with Antonio’s words. Brava and Campos lack
    professional due care which led to an audit that us mostly a failure.

    Thank you for completing the task. If you have


    not completed, or have difficulty in accomplishing the
    activity, please send me a message to our google
    class or you may ask clarifications through a text
    message or phone calls on the contact number
    included in your course guide.

    And now, you are ready for the assessment.

    “Not intended for publication. For classroom instruction purposes only”.

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