Ms. Crawford would like you to be prepared to participate in a discussion of fraud risks at Eagle View. Write a memo (P 14) providing your thoughts and concerns about the risk of fraud. Be sure to address the following:

Consider possible means of employees committing both fraudulent financial reporting and misappropriation of assets.

You may assume that management is not aware of any fraud within Eagle View.

Be sure to address the three categories of risk (incentives/pressures, opportunities, and attitudes/rationalization) in your memo.

Remember to address how these risks would affect the audit plan (more or less work, different types of work, changes in the timing of testing, etc.) and what processes or accounts would be affected.

Calahan recommended an impairment of $192,000. Eagle view has $1.7 million in assets; however only has $500,00 in equity. They felt it was very material. Calahan feels that turning the stores into wheatland products ruined their potential. There isnt enough demand for wheatland products to carry on multiple stores. Salaried employees do not need to track hours worked. Eagle View began a bonus system in 2008 for all store managers and assistant store managers. They will receive a bonus in January based on the prior years sales. Distributor Sales The regional sales representatives typically call in each order. However, if it is a regular customer, they are allowed to call in their own order. Disposals - all store managers and Steve Thomas perform a quarterly evaluation of fixed assets. The managers note on the listing whether the items are considered usable or should be disposed of. (Only large disposals of over $10,000 require Board Approval) Cash Disbursements - Sue Miller has authority to sign checks up to $5,000. She is also who deposits all checks. She also receives the bank statements and files them herself. Eagle view does not have a formal Internal Audit Function. Both Sue Miller and Tammy Ross perform basic reviews. Warehouses - The existing warehouse is being prepared as part of the expansion. No special processes have been implemented to ensure proper accounting of these costs. All construction invoices went to Mark Rollins for coding. Anything over $500 required Rosens approval, but he admitted that he did not verify the appropriate account coding. Travel & Entertainment Expense - All sales representatives and executives have company credit cards. Polly Mitchell maintains the payroll tax records and prepares the quarterly payroll tax forms. She also prepares the calculation of the bonuses. Rosen feels the 7th store will be successful even though the 6th store is not successful. Salaried Employees Tammy Ross and her assistant prepare all paychecks including their own. Non-inventory Purchases Rollins has his assistant search which vender can meet the request and best price. Cash management Sue Miller only takes a sample of remittance slips to compare the amounts on the statement dates. She then forwards it to Rosen for review who signs off on all of them. Commission Sales - Mark Rollins prepares a sales summary for commissioned employees. Then also approves the payouts. Acquisitions Rollins also has his assistant search to determine which vender can meet the request at the best price. One item that was unclear with regards to disbursements shows that Tammy Ross signed off and prepared them.