Saudi Electronic University: Insurance Accounting ACCT 424 Case Study

This assignment presents a case study focused on insurance accounting, highlighting issues such as missing accounting records, embezzlement, and the importance of accurate audit workpapers. It explores the short-term and long-term consequences of work paper embezzlement, including potential bankruptcy, legal charges, and damage to the organization's reputation. The case study also examines the legal ramifications of financial malpractices and the impact on stakeholders, particularly stockholders. Furthermore, it delves into the discrepancies within the Saudi zakat system and its role in poverty alleviation, referencing relevant articles and regulations. The document emphasizes the need for corporate entities and wealthy individuals to pay zakat, which is then distributed to the poor, aiming to reduce poverty levels within the nation.

Running head: INSURANCE ACCOUNTING
Insurance Accounting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1INSURANCE ACCOUNTING
Table of Contents
Answer to Question 1:.....................................................................................................................2
Part 1:...........................................................................................................................................2
Part 2:...........................................................................................................................................2
Part 3:...........................................................................................................................................2
Part 4:...........................................................................................................................................3
Part 5:...........................................................................................................................................3
Part 6:...........................................................................................................................................3
Answer to Question 2:.....................................................................................................................4

2INSURANCE ACCOUNTING
Answer to Question 1:
Part 1:
The issues that have been involved in this particular case study are elucidated briefly as
follows:
There were absence of the accounting records and compliance with the generally
accepted principles of accounting.
The previous corporate controller had misused huge amount of money and the individual
had fled the United States.
The audit manager had admonished the staff auditor so that the malpractices in the work
papers could be highlighted.
Part 2:
In the provided case, there is need for redoing the audit work papers. The reason is that
the corporate controller had left US after misusing huge amount of money. With the help of audit
work papers, the auditors could undertake important decisions. This mandates the need of
assuring the provided information to be of good quality.
Part 3:
Based on the provided information, it is of utmost importance to redo the audit work
papers, since this is highly useful for the organisation. In case, there is misleading information,
the decision-making process of the auditors would have negative impact on the organisation.
Along with this, the impact would be negative on the brand image and reputation of the
organisation as well in case of inaccurate information.

3INSURANCE ACCOUNTING
Part 4:
Short-term consequences of the work papers embezzlement:
The organisation might find itself in bankruptcy
The organisation might face legal charges due to missing documents
Money would be incurred on audits, which do not provide accurate results
Long-term consequences of the work papers embezzlement:
There is high chance of liquidation, as the organisation might owe money from lawsuits
There would be trust issue in the audit department of the organisation, since it did not
carry out its functions effectively
Part 5:
One legal ramification is the imprisonment of a number of years based on the prevailing
legislation. On few occasions, the individuals might need to incur a certain amount as fine or
terminated from the job.
Part 6:
The note in the papers would affect the stockholders, since they possess the shares of the
organisation. The price of the shares of an organisation is reliant on various factors out of which
news or public declarations in media about the business affairs is one of them. The stockholders
invest in the shares of an organisation both for dividend income and gain on sale. However, it
might influence the other stakeholders as well depending on its severity.

4INSURANCE ACCOUNTING
Answer to Question 2:
Various discrepancies are inherent in the Saudi zakat system, which would enable in
eliminating poverty of the nation. Zakat is enforced in the form of tax in Saudi Arabia.
According to “Article 21 of the Saudi Basic Law”, there is levy of alms tax, which would be
paid to the legitimate recipients. The “Saudi Arabian Monetary Agency (SAMA)” ascertains the
zakat recipients, which is considered as a fund.
The “Social Insurance Agency of the Ministry of Social Affairs (SAMA)” registers the poor
people to transfer the zakat fund. The deposition of tax revenues is made at SAMA, which is
used in order to cover public expenditure for various services rendered. In compliance with
“Article 1 of the Saudi Zakat Regulation”, it is necessary for all the corporate entities and rich
individuals to pay zakat irrespective of their gender, age and capacity. The amount collected is
then distributed to the poor individuals of the nation and as a result, it helps in minimising the
level of poverty.