Assignment
Case: Horseplay in Dixon: Lessons Learned from the Rita Crundwell Fraud by Barbara Apostolou, Nicholas G. Apostolou and Greg Thibadoux.
Discussion Questions
1. Who is responsible for the Rita Crundwell fraud going undetected for over two decades? What traits or behaviors of the various individuals involved impact the outcome?
2. An auditor is required to be independent. The American Institute of Certified Public Accountants (AICPA) requires that auditors follow a four-step process or conceptual framework in which they (1) identify threats to independence, (2) evaluate the threats, (3) identify safeguards against the threats, and then (4) evaluate safeguards to ensure that they reduce threats to independence to an acceptable level. Use this process to reflect upon whether the Clifton auditors or Sam Card were independent. Refer to the AICPA's Code of Professional Conduct, Conceptual Framework for Independence.
3. Statement on Auditing Standards (SAS) No. 122, AU§240, Consideration of Fraud in a Financial Statement Audit (AICPA, 2014a), describes the auditor's responsibility related to material misstatements caused by fraud. Much of the guidance in AU§240 is relevant to the Rita Crundwell case, but consider specifically the following issues:
a. Professional skepticism. Define and explain how it was or was not maintained.
b. Risk assessment procedures. Define and consider where the auditors may have failed to properly consider and respond to fraud risk. What industry considerations may have been a factor? What do you think that auditor should have done with respect to risk assessment?
4. Fraud is generally conceived as consisting of three elements (often called the fraud risk triangle): (1) incentive or pressure to commit fraud, (2) perceived or actual opportunity to do so, and (3) an attitude that permits the perpetrator to rationalize the behavior. According to AU§240, auditors are required to consider these elements and the corresponding impact on fraud risk. Given the facts of the case, identify the presence or absence of each element. Do you think that the auditors properly applied the fraud risk triangle? What specific risk factors can you identify as belonging to each of the three elements? Explain your answer.
5. The City of Dixon was subject to a governmental audit in accordance with Generally Accepted Government Auditing Standards (GAGAS) published by the U.S. Government Accountability Office. The City of Dixon became obligated to have a Single Audit in 2006 because its Federal financial assistance exceeded a new threshold, which ostensibly led to the shenanigans with Clifton and Card as described in the case. Identify how the auditor's responsibility changed in 2006.
6. What recommendations would you make to improve the internal controls over financial reporting? Do you think that the City of Dixon has reacted strongly enough? Explain your answer.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Case.rar