Fraud Investigation Research Report for ACCT 1111 Assurance and Forensic Accounting

This research report focuses on the accounting and financial collapse of Quintis Ltd. It includes summarizing key issues, identifying fraud symptoms, and reviewing the disclosure of key audit matters. The report also discusses the responsibilities of auditors and their duties.

Research Assignment
ACCT 1111Assurance and Forensic Accounting
Fraud Investigation Research Report

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Research Assignment
Table of Contents
Introduction..............................................................................................................................3
Part A........................................................................................................................................3
1. Summarising key issue.....................................................................................................3
2. Identifying three fraud symptoms..................................................................................3
3. Summarising responsibilities...........................................................................................4
Part B.........................................................................................................................................5
1. Key issue of Quintis Ltd financial collapse....................................................................5
2. Summarise three potential fraud symptoms..................................................................5
3. Reviewing disclosure of Key Audit Matters...................................................................6
4. Describing opinion on auditor’s duties...........................................................................7
Part C........................................................................................................................................8
Conclusion.............................................................................................................................8
Bibliography.............................................................................................................................9

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Research Assignment
Introduction
In this assignment three parts and several topics based on accounting of Quintis Ltd
will be introduced. As per Part a few answer will be introduced by the help of a video called
false assurance and respectively Quintus financial collapse will explained in following Part
B. This following article is a research based assignment which has three parts. In following
Part C, a brief conclusion about whole learning based on Quintis’s accounting and financial
collapse will be explained as per this particular research based assignment. Brief discussion
about Key Audit matter (KAM) will be introduced in order to maintain auditor duties and
responsibilities.
Part A
1. Summarising key issue
False Assurance can be considered to be a superior quality film that can be utilized as
a tool for training that, by means of discussion or else discussion-associated practices, can
augment knowledge. This not only includes a wide range of teams particularly in-house,
counting teams of finance as well as internal audit, but also that of board members.
Particularly, this video drama was formulated by the “Institute of Chartered Accountants
England and Wales” and intends to assist in thought-generating discussions regarding the
way accountants, assessors and company directors need to act when encountered with
complicated circumstances. In particular, this film takes into account the account of two
unstable years in of a fictitious business firm titled ‘D-Merton’, and divulges the way
activities of the firm’s Executive Directors brought the same to its knees.
Essentially, there was inadequate vigilance and guts of Board of Directors of the firm. Also,
there was also failure to recognize and inspect red flag concerns by external assessors. It can

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Research Assignment
be said that the film is divided into four different segments. Essentially, at the closing of each
segment, the respondents will be offered the opportunity to replicate and interacting opinions
and debate regarding what they could have carried out in a better way instead, under similar
state of affairs. Essentially, the issues identified in the film are both timely as well as
pertinent to reality of Cyprus and can deliver a foundation for discussion regarding solutions
and superior practices between ACI facilitators as well as the partakers of KPMG Cyprus.
2. Identifying three fraud symptoms
Fraud symptoms can be classified into analytical symptoms, accounting otherwise
documentation symptoms, symptoms of lifestyle, tips with complaints, symptoms of control
together with behavioural along with verbal symptoms.
Analytical Symptoms: Revenue (high), low sales discounts, low sales returns, expense of
bad debt, high accounts receivable, low allowance for bad debt, low cash in comparison to
reported sales revenue (Purda &Skillicorn, 2015)
Documentary Symptoms: Documents missing in the cycle of revenue, ledgers associated to
revenue not balancing (for example sales as well as receipts of cash), considerable bank items
as well as other reconciliations, unapproved or else unsupported balances associated to
revenue
Symptoms of control: Overriding important internal control actions linked to revenue cycle,
weaknesses present in the cut off procedures otherwise other important accounting
procedures.
3. Summarising responsibilities
The audit undertaken by TYSL accountants need to be as per ISA 240 indicates that
accountabilities of auditors associating to fraud in process of audit of financial assertions.
According to regulations stipulated under “ASA 240.5/ISA 240.5”, essentially the TYSL

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Research Assignment
Accountants have accountability to sketch an audit to accomplish sensible assurance in order
to ensure that fraud does not happen. Also, the impact of the scam has the need to be
presented in the financial assertions. Then there exists no material misstatement particularly
in financial statements owing to error otherwise fraud. This shows that there is need to
present extensive investigation with the administration with regard to fraud. At the time of
acquiring rational assurance it can be said that TYSL Accountants are accountable to enhance
skill and maintain scepticism during the course of audit (referring to directives of “ASA
200.15/ISA200.15”) (Kachelmeier et al., 2017). Particular, it is also important to identify that
procedures of audit that are effectual in identifying error might not be effectual in pointing
out fraud. In order to make sure that overall engagement team is conscious of accountabilities
and fraud risks as well as error. Again, ISAs also states that discussion needs to be carried out
within team and for diverse members who are not in attendance at the specific meeting. The
audit partner of D-Merton’s has the necessity to ascertain different matters that should be
communicated properly.
Part B
Key issues of Qunton’s Financial collapse
The key issues of Quintis Ltd financial collapse include:
a) The company was going to alternative sell sandalwood by further evaluation and
restructuring. There was not a proper agreement in place between other investors
and existing shareholders regarding the selling agreement of shareholders
b) The company mislead investors by reporting a fictitious shipment of USD 25
million to an unknown Chinese company, This encouraged investors to invest on
the company after hearing about this news. However on investigation there was no
evidence of such shipment being made. Even the Chinese company was a small
firm who had no means to perform the shipment.

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Research Assignment
c) Ponzi scheme- The company made a claim that it would pay dividend to investors
starting from two years of initial investment. This claim was false. There was no
scope of such earning that amount of dividend because the dividend will accrue
only after 15 years, when the harvesting of sandalwood is done. This is a Ponzi
scheme whereby the company makes promises to pay investors the money from
other investors.
2. Summarise three potential fraud symptoms
The fraud symptoms include:
a) Accounting anomalies- The Company made incorrect valuation of sandalwood trees
and reported profits from non cash activities.
b) Analytical anomalies- the company announced that it will declared dividend after two
years. However there was no scope of such dividend. This was a major red flag that
the company should have uncovered.
c) Internal control weakness- The Company did not undergo proper internal control
measures. There was a lack of proper internal controls. Otherwise the misleading
would have been uncovered.
The relevant authorities have the power to persecute the individuals that are responsible
for committing the fraud. There can be a civil case or a criminal prosecution regarding the
occurrence of that fraud. The authorities can make an arrest or enforce court orders or file an
injunction. Since the company wilfully made the fraud, there is bound to be evidence that ties
this company to the financial crisis. The auditor can find evidence of such matters in the
correspondence emails between directors and the chairman’s emails.

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Research Assignment
3. Reviewing disclosure of Key Audit Matters
According to ASA 701, key audit matters are those matters that are most significant in the
auditor’s report. The auditor is required to describe each key audit matter and form an
opinion thereon .It needs to describe and disclose each key audit matter in the auditor’s
report. It is required to assess the responsibility of auditors. Some of the key audit matters
include the improper valuation of biological assets , impairment evidences in carrying value
of non-current assets and non-recognition of revenues for establishment fees. These
disclosures have not greatly benefitted shareholders . The company made improper
disclosures that caused significant losses to the shareholders. Providing adequate disclosures
will provide a better corporate governance, better auditing and better financial
reporting(Purda & Skillicorn 2015).
In Quintis, Ernst & Young disclose their audit report by Key audit matter in 2017. Such
annual audit report based on the model of key audit matter is not able to create benefits
criteria for the shareholders.According to Bédard,Gonthier-Besacier&Schatt, (2014),proper
key audit matter report on annual audit report is going to be more significant and proper.
Therefore specific key audit matter report is described in order to improve the fellow audit
report. One significant changes are introduced towards Auditors own report standards to
anInternational standards auditing report. Key Audit Matters (KAM) is associated in
determining some following auditor’s report in accounting, which are-
● According key audit matters, auditors are required to understand or identify the
respective areas with high chance towards high risk management.
● In the financial statement, auditions significant judgements are needed in order to
identifying the following high risk based areas.
In this report of key matter audit, each description of auditor’s report is based on a
relevant reference in order to relative disclosure. This reference are proposed in order to

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Research Assignment
understanding the importance of this key audit matters in respective audit report and the
whole process and following requirements of this key audit matter report are need to be
described.
4. Describing opinion on auditor’s duties
The auditor was negligent in carrying out its duties. No appropriate audit evidence was
done to conduct the audit. An auditor is expected to carry out its duties with skill and care.In
this case the auditor was professionally negligent in carrying out its duties because the audit
team could not uncover material misstatements that were abundant in this company. The
auditor did not uncover any material misstatement in 2016. It is the responsibility of the
auditor to form an unqualified opinion on the financial statements. This opinion should be
independent and impartial . The objective of the auditor is to make sure that the financial
statements of a company reflect a true and fair view of the financial statements
After going through the whole proposed audit report of the particular company, several
duties responsibilities of auditors are not maintained. According toCarcello, Hermanson&
Ye(2011), in order to create effective management, auditor’s responsibilities are required. As
per the opinion on audit report several major responsibilities and duties are required in the
case of this particular company’s audit report and those duties and liabilities are followed-
● It is auditor’s responsibilities to kept accounting section carefully and faithfully of
following organisation.
● As per previously proposed auditor report, applied regulation and framed procedures
are not able to enhance sufficient report in order to overview effective assessment.
Proper information and exact allocated revenue are sufficient for the security based on
effective assessment.

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● Expansion of all money and account charges is liable to create aim of the purpose
which is based on a provision set by the government. It is auditor's duty to confirm
that payment of public money has been incurred without waste and extravagance.
Part C
Conclusion
The audit undertaken by the company indicates that the auditing procedures have not
been conducted in a fair manner. Although there is no material misstatement in the audit, the
scam indicates that the audit has not been done in an appropriate manner. Hence it is very
important to conduct the audit in a fair and responsible manner so that financial
misstatements of this nature can be detected early. In both cases there is evidence of financial
scam and the auditor was negligent in carrying out its duties

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Research Assignment
Bibliography
Bédard, J., Gonthier-Besacier, N., &Schatt, A. (2014, January). Costs and benefits of
reportingKey Audit Matters in the audit report: The French experience.
In International Symposium on Audit Research.Retrieved from
http://documents. escdijon.
eu/pdf/cig2014/ACTESDUCOLLOQUE/BEDARD_GONTHIER_BESACIER_
SCHATT. pdf.
Carcello, J. V., Hermanson, D. R., & Ye, Z. (2011). Corporate governance research in
accounting and auditing: Insights, practice implications, and future research
directions. Auditing: A Journal of Practice & Theory, 30(3), 1-31.Retrieved
fromhttp://aaapubs.org/doi/pdf/10.2308/ajpt-10112
Dillard, J., &Vinnari, E. (2017). A case study of critique: Critical perspectives on critical
accounting. Critical Perspectives on Accounting, 43, 88-109.Retrieved
fromhttps://tampub.uta.fi/bitstream/handle/10024/101036/a_case_study_of_cri
tique_2017.pdf?sequence=1
Do, T. K. T., Hadji-Minaglou, F., Antoniotti, S., & Fernandez, X. (2015). Authenticity of
essential oils. TrAC Trends in Analytical Chemistry, 66, 146-157.Retrieved
fromhttp://botanicert.com/wp-content/uploads/2017/01/Article-Authenticity-
of-essential-oils.pdf
Kachelmeier, S. J., Schmidt, J. J., & Valentine, K. (2017). The disclaimer effect of disclosing
critical audit matters in the auditor’s report.Retrieved
fromhttps://magazine.bus.miami.edu/_assets/files/faculty-and-research/
conferences-and-seminars/accounting-seminars/KSV_93014.pdf
Kumar, J., & Agarwal, R. G. (2016). Design and Development of Electronic Tree
Surveillance System for Detection of Illegal Wood Cutting (Doctoral

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dissertation).Retrieved
fromhttp://dspace.thapar.edu:8080/jspui/bitstream/10266/4259/4/4259.pdf
Purda, L., &Skillicorn, D. (2015). Accounting variables, deception, and a bag of words:
assessing the tools of fraud detection. Contemporary Accounting
Research, 32(3),1193-1223.retrieved
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accounting-variables.pdf
Velte, P., &Freidank, C. C. (2015). The link between in-and external rotation of the auditor
and the quality of financial accounting and external audit. European Journal
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257558065_The_link_between_in-
_and_external_rotation_of_the_auditor_and_the_quality_of_financial_account
ing_and_external_audit/links/54ce35ca0cf298d6565f797b.pdf
Wong, S., & Venkatraman, S. (2015). Financial accounting fraud detection using business
intelligence. Asian Economic and Financial Review, 5(11), 1187.Retrieved
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1207.pdf