During the course of an audit, Mr. Robin, CPA, observed that one of the clerks in the
Question:
During the course of an audit, Mr. Robin, CPA, observed that one of the clerks in the small toy department consistently was taking money from the customers in areas other than at the cash register. At the time, he gave little thought to this practice, because most items were priced in "whole dollars" and the customer did not need any change. He did mention this to the controller, who had the same reaction. The audit was completed, and the report was issued.
The following year it was discovered that the clerk had been keeping the money from these "whole dollar purchases" rather than putting it in the cash register.
Required:
a. Could the auditor be held liable for failure to detect this fraud? Should his comment to the controller make any difference?
b. Assume that the auditor decided to include his observation in a letter of reportable conditions, along with his recommendation on how to eliminate this weakness and provide reasonable assurance that currency receipts are placed in the cash register drawer. Draft such a letter.
Step by Step Answer:
Auditing An Assertions Approach
ISBN: 9780471134213
7th Edition
Authors: G. William Glezen, Donald H. Taylor