Key Issues Associated with the Fraud - Assignment Example

Auditing Name Date Part A Summarize the key issues associated with the fraud The firm that confirmed the testing was the same company that built the defenses while some wanted an independent entity to help in accessing the defense capability The use of original technology and the new technology in the reporting of revenues thereby failing to incorporate all revenues Failure to understand the system and how it works thus failing to identify irregularities Payment of Premintel and inability to scrutinize it Conflict of interest since Premintel involved a family affair especially involving Richard relatives through he refuted the claims Sustainability increase impairment proposal and the conflict with the bank due to fall in sales by 30% Payments being made to Premintel more than the year and full disclosure were not made given that, Richard Dalton's sister had been one of Premintel's founding directors, but his sister had resigned before Premintel was engaged. Furthermore, the Premintel's engagement was supposed to have ended yet the payments have continued. While Richard's sister may have resigned, her husband, Richard's brother-in-law, is still one of the directors though they indicated that they might have divorced Dan Sommers negligent was given that he failed to scrutinize the issues and instead left when the girlfriend called him. Furthermore, he lied about going through the reports which created a scenario that some things may have been overlooked. Tom uses the photo he had taken to blackmail Kris to accept the new cyber security team and other fraudulent dealings which were discovered later Inconsistency in the NEW GENARIA deal which later was found to have significant problems Report on access to the company database four times since it was overlooked since the auto-detection software didn't flag the attack and the auditors did not discover the breach Inconsistency on the payment of suppliers and the constructors are given that some did not exist The investigators have reviewed all the IT contracts. They've identified five payments made to three bogus suppliers which were controlled by Tom's associates. The police have now started an off the record - that a payment from one of these companies was made to an account believed to be controlled by the official in New Genaria. Two of the larger payments were co- authorized by Richard though this was done to ensure that the revenues kept coming in Using the fraud triangle, explain why the fraud was able to be committed Pressures Girlfriend pressures Dan leaves after the girlfriend called him and therefore fails to work on the duties that were awarded to him and lied to Joe about going through the reports. As a professional, Dan should have been able to separate personal issues with the professional issues and through this ensure that his decision-making process was not in any way affected. Furthermore the financial pressures and the need to make sure that the company made higher profits made Richard authorize large suspicious payments to make sure that there was the consistent inflow of REVENUES in the company. This was irregular given that the right processes should support such a move within the company. Furthermore, the pressures associated with the need to secure the contract and retain friendship with Tom made Richard adopt a defensive approach when inquiries were made on the issues relating to the Premintel and his relatives involvement in the running of the company. Opportunity The managers had the power to make and authorize payments which highly contributed to the fraud cases. The basis of relying on the promise from their friends of colleagues made the people involved reluctant to scrutinize the issues even further. For instance, even after Mary was promised that the matter involving Premintel had been settled, she was entitled to examine the issue even further. Furthermore, Tom had the ability to influence the decision-making process and authorize payment which later was found to be fraudulent. The management and other oversight organs ought to have identified significant issues associated with the payments made especially the securing of contractors and the tenders that were later issued. Various people should be involved in the tendering process, and the decisions should be made as a collective group but not by individuals such as Richard, Tom, and Kris. Furthermore, if there were some people involved, then Tom could not have used the photo to blackmail Kris into authorizing various payments since they could have been detected. Personal Justifications Richard made various justifications especially on the issues surrounding the payment made to Premintel and the involvement of his relatives. His personal relationships should have been investigated further to ensure that there was no conflict of interests. Furthermore, the justification of Richard to justify large payment to make sure that there was incoming of revenues is wrong. Besides, Kris defended his actions by the fact that he was blackmailed which amounted to fraudulent activities. Consider whether the auditors may have been negligent. Auditors were negligent in their actions, and they willfully ignored various sensitive issues that could have identified weak areas in the organization (Wiggetts. 2015). Due to the auditor's negligence, they were unable to determine various problems that were associated with the illegal entry into the defense systems given that they did not have the technical expertise on the issue. If they had relied on the expert, then the illegal entry could have been highlighted. The actions of Dan results to negligence given that he lied about evaluating the activities and the payments involving Premintel. If this issue could have been scrutinized further, then the fraud involving Tom and the Kris blackmail could have been averted. It is the auditor's responsibilities to identify risky areas and report them to the management for the further actions to be taken. Part B Operation Dunham special report January 2017 Summarize the key issues that were considered by investigators Exact cost of the project was unknown Conflict of interest especially in the tendering process where the CSG Services Pty Ltd (CSG) was awarded the contract despite the fact that had financial interest in the company Irregular payments to the payment to Alliance Recruitment Darrell Fraser involvement in the corrupt dealing By 2013 the Ultranet was not yet delivered which led to its cancellation The first tender failed due to the pricing, and it exceeded the government budget of 61.5million Second selective tender which resulted in two bids shortlisting of R, Asia Pacific, and CSG Oracle consortium The board did not shortlist the RM Asia Pacific which meant that the contract with CSG went ahead Procurement Alliance recruitment was not Insider trading in CSG and other associates by employees and other associates Use of confidential information to obtain personal advantage and purchase CSJ shares Fraser resigned to take up appointment with CSG Oracle Consortium Failure Of Three line of defense Unethical behavior of the Darrell Fraser Lack of financial oversight Using the fraud triangle, describe the circumstances allowed the corruption identified by IBAC to occur Pressure Financial pressures where the employees used the information that they were the preview to purchase the CSG Oracle Consortium stock (IBAC, 2017). At the same time, those with insider information also informed their associates on the ways in which they could purchase the stock. The same actions were taken by Darrell Fraser who later left to take up the management position at the CSG Oracle Consortium share. Opportunities There were opportunities to influence the tender process and the management ability to make decisions even without proper inspection. Darrell Fraser had the ability to control various decision-making process which led to the engagement in fraudulent activities. Furthermore, there were opportunities for the employees to use the insider information to purchase the stocks of CSG Oracle Consortium which could have been effectively regulated. Besides, Darrell Fraser had the ability to ignore the conflict of interest claims, and his activities could have been flagged by the senior management of the company if proper measures were in place. Personal Justifications The Darrell Fraser actions of leaving to take up employment opportunity CSG Oracle Consortium resulted in fraudulent activity even in cases where CSG Oracle Consortium offered better terms of employment. This is because he was active involvement in the tender process which helped CSG Oracle Consortium in securing the tender. Therefore, the justification of his resignation is not valid given that it was not based on ethics and integrity but instated it was motivated by financial interests which arose after the tendering process. This directly results in fraud activity. Even though some employees may not have bought the stock of CSG Oracle Consortium, still they advised their associates on how to purchase the shares, and therefore the sharing of information was not justified. Should the Department's auditors have done more to identify the weaknesses that led to the corruption? The departmental auditors could have discovered the weaknesses given that they should have evaluated the decision-making process especially by questioning the reason as to why RM Asia Pacific was not involved in the tendering process. This could have played a key role in identifying the significant weaknesses that the company had including its inability to completely fund the project given that funds were diverted by Darrell Fraser to ensure that the project was still viable. Furthermore, it could have also established the employees' involvement in the purchase of the CSG Oracle Consortium stock by examining the conflict of interests between the employees and the operation of the CSG Oracle Consortium. Establishing the conflict of interest between the employees and the Darrell Fraser could have been vital in identifying the fraudulent actions that had taken place. If you were the auditor for CSG Ltd, what steps or procedures would you take, if any, during the planning of the audit for the current year 2017? As an auditor for CSG, proper measures should be taken to ensure that adequate reporting and disclosure is done to validate various operations of the company. The investigation should be done on the matter to ensure that corruption cases are identified and reported appropriately. It is the work of the auditor to identify irregularity and report the cases to the company management. Furthermore, it is important to evaluate the allegation and advice the management on whether fraudulent activity took place in the company. This will help the management in formulating the adequate response on the matter given that the issue may affect the reputation and the future operations of the company. References IBAC. (2017). Operation Dunham special report January 2017. Retrieved from: http://www.ibac.vic.gov.au/publications-and-resources/article/op-dunham-sr-jan-17 Wiggetts. D. (2015). False Assurance. Chartered Accountants Hall (CAH), London Read More