Assignment 1: Audit Sampling and Accounts Receivable Assignment

1 This assignment is based on material covered in Modules 1 and 2 of the course and is worth 5% of your final course grade. Question 2 (15 marks) Read the article Keep Eyes on the Cookie Jar. This article introduces you to fraud specifically, to one of the most notorious cases of company fraud from the 1990s. James Lake was able to steal $20 million over the 11 years he worked for real estate firm J.J. Barnicke Ltd. Read Discussion Case (DC) 7-4 J.J. Barnicke Ltd.: Missing Millions and a Widow with a Lavish Lifestyle on page 357-359 of the textbook. Required: Discuss the following:

a. Assuming the role of the judge, discuss which partys arguments are more convincing and why. Also discuss one piece of additional evidence you would want provided to strengthen either partys arguments. (4 marks)

b. Assuming that J.J. Barnicke Ltd. hired Ernst & Young to perform an annual audit during the 11 years that James Lake was committing fraud, discuss one procedure that the auditors could have performed that would have identified the fraud. (5 marks)

In developing your procedure, please ensure that you consider the guidance related to the four rules for designing audit procedures from the video Auditing Sales at The Athletes Foot in Module 1, Topic 1.3.