ntego Bay, claimed for non-existent business mileage from Kingston to Montego Bay and used the company credit card to purchase items for personal use. I am very worried about the scale of this fraud, as travel and client entertainment is one of our biggest expenses, which is why we are seeking the assistance of the internal audit division to conduct an audit. We plan to take action to prosecute these employees in an attempt to recoup our losses if evidence shows that a fraud has indeed occurred. We know that two years ago your division did an audit and found that the control environment is generally good so this fraud should not have occurred. However, we would like to meet to have further discussions on the matter.

Required:

(a) Write a memorandum to Mr. Thomas explaining three components of a good control environment. Use the Committee of Sponsoring Organisation (COSO) guideline to frame your answer. (8 marks)

(b) What are four (4) fraud red flags that may have been present in JamSys Limited indicating the likelihood of this alleged fraud? (4 marks)

(c) Describe three (3) matters that should be discussed in the meeting with Tom Thomas about planning the audit into the alleged fraudulent activity. (6 marks)

(d) State three (3) types of evidence that you need to examine for this audit (3 marks)

Caribcel Group is a telecommunications giant with its headquarters in Kingston. Caribcel operates currently operates in Jamaica, Haiti, Dominica and Trinidad and Tobago. JamSys Limited (JSL) is the largest subsidiary of Caribcel Group and provides information technology services to business customers in the region. You are a new audit manager with Caribcel group and are responsible for the audit of the subsidiary JSL. Recently, the finance director of JamSys Limited Tom Thomas, contacted you, saying: 'I was alerted yesterday to a fraud being conducted by members of our sales team. It appears that several sales representatives have been claiming reimbursement for fictitious travel and client entertaining expenses and inflating actual expenses incurred. It has been alleged that the sales representatives have claimed on expenses for items such as gifts for clients and office supplies which were never actually purchased, claimed for business-class airline tickets but in reality had purchased economy tickets to Montego Bay, claimed for non-existent business mileage from Kingston to Montego Bay and used the company credit card to purchase items for personal use. I am very worried about the scale of this fraud, as travel and client entertainment is one of our biggest expenses, which is why we are seeking the assistance of the internal audit division to conduct an audit. We plan to take action to prosecute these employees in an attempt to recoup our losses if evidence shows that a fraud has indeed occurred. We know that two years ago your division did an audit and found that the control environment is generally good so this fraud should not have occurred. However, we would like to meet to have further discussions on the matter. Required: (a) Write a memorandum to Mr. Thomas explaining three components of a good control environment. Use the Committee of Sponsoring Organisation (COSO) guideline to frame your answer. (8 marks) (b) What are four (4) fraud red flags that may have been present in JamSys Limited indicating the likelihood of this alleged fraud? (4 marks) (c) Describe three (3) matters that should be discussed in the meeting with Tom Thomas about planning the audit into the alleged fraudulent activity. (6 marks) (d) State three (3) types of evidence that you need to examine for this audit (3 marks)