Case Studies / Problem Solving Below are summaries of cases studied. Please read each case, analyze the facts, and provide a brief solution to the problem.

D. Sally Smith was the Treasurer of University Hospital. Ms. Smith perpetrated a $15 million fraud over a ten-year period. The fraud was accomplished through a "secret bank account" opened by Smith in the name of the Hospital Patient Reserve Account. Smith created phony invoices for the Hospital Patient Reserve Account, writing checks in payment from one of the Hospital's bank accounts, and payable to the "Treasurer".She would then deposit the checks into the secret account to pay her personal expenses. Additionally, she would prepare bank reconciliations for the accounts, made deposits, and was provided sole access to all statements, and correspondence from the University Hospital's account. Identify the various weakness in internal controls, and how the University Hospital might have prevented such a loss.

E. In conducting the audit of HIJ Company, the auditors want to provide for any potential loss contingencies. During their examination the following events occurred:

1. After sending a letter to the company's attorneys, and following up with several calls, no one from the law firm responded to their request.

2. A dispute with the IRS two years ago was never resolved.

3. The auditor's have an inclination that the owner of HIJ was having his personal notes endorsed (or guaranteed) by the company.

4. During a cash-flow crunch at the beginning of the year, HIJ sold roughly $250,000 in notes receivable with recourse.

Please briefly discuss each of the above items, and how the auditor's ought to respond to each.

F. The auditors of JKL Company are about to conclude their audit. Before they completely finish, they observe a pre-publication copy of the company's annual report to shareholders in the CFO's office. In the annual report, the auditors read that the company is seeking to expand its operation by acquiring a small firm. Should the auditors react to this information? What ought they do?