Insurance Accounting Case Study: Embezzlement and Audit Implications

This assignment presents a case study focused on insurance accounting, highlighting issues such as missing records, embezzlement by a corporate controller, and the subsequent challenges in conducting a proper audit. The solution emphasizes the importance of re-doing audit workpapers to ensure compliance with accounting standards and the necessity of reporting any embezzlement to maintain the integrity of the audit. Failure to report embezzlement can lead to legal consequences and reputational damage for both the auditor and the company. The analysis also covers the implications of audit notes and the potential legal actions that should be taken against the involved parties. Overall, the case underscores the critical role of thorough auditing practices in detecting and addressing financial fraud within an organization.

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INSURANCE ACCOUNTING

Insurance accounting
1. The issues that can be noted in the case are of the missing records from the books.
As the records are missing, it will be difficult to ascertain the amount of loss.
Moreover, the corporate controller has led to misappropriation and has fled to United
State, therefore; it is difficult to get back the papers.
2. Yes, the audit work papers must be re-done because without the audit papers it is
difficult to prepare the financial statements. The audit work papers must be prepared
because it contains the overall audit evidence. Audit working papers help the audit
work to give assurance that the audit was perform in accordance with the appropriate
relevant accounting standards (Baldwin, 2010).
3. It is difficult to get the audit evidence once again. However, if the paperwork is
appropriate then according to the best of skills the papers can be re-done. this will
need time, as well as effort. If the work papers are unavailable then it will affect the
audit process and can impact the authentic view. To ensure, that the audit remains
completed the papers need to be prepared again and the embezzlement needs to be
reported that will signify the defects have been observed and proper care regarding
the same is done (Cappelleto, 2010).
4. If the embezzlement is not report in the work papers it will mean that the audit is
not properly done and the statement does not reflect the true and fair view. Not
reporting embezzlement means that the auditor has not considered the issue that is
material to the business. This can lead to a potential problem. In the short term, it can
create discontentment among the stakeholders while in the long term the notice of this
fact can lead to loss of reputation and loosing up of potential parties (Gay & Simnet,
2015).
5. The legal consequence of such a happening is that a legal case must be initiated
against the corporate controller account who fled to the United States. When there is
an embezzlement of funds, it means that a financial fraud has happened. Hence, this
fraud attracts a criminal case. Further, an evaluation of the overall organization needs
to be done to find out the deficiencies and others who are involved in the case.

Insurance accounting
Moreover, the Audit Manager must be questioned as to why the embezzlement should
not be reported.
6. An audit note is a note that the auditor provides when there is a certain problem or
missing point. It is done to provide a clarity to the fact that the auditor has seen all the
accounts and the deficiencies are noted. Such a note is a cause for concern if there is a
grave problem because the stakeholders do not like a company where a problem exists
(Elder et. al, 2010). In the case of a problem, the auditor provides a note that the
decision is given considering the points and such difficulty exists. However, this
makes the stakeholder apprehensive in nature.

Insurance accounting
References
Baldwin, S. (2010) Doing a content audit or inventory. Pearson Press.
Cappelleto, G. (2010) Challenges Facing Accounting Education in Australia.
AFAANZ, Melbourne
Elder, J. R, Beasley S. M. and Arens A. A. (2010) Auditing and Assurance Services.
Person Education, New Jersey: USA
Gay, G. and Simnet, R. (2015) Auditing and Assurance Services. McGraw Hill