Practical Problem 1 You are K.C. Barton, a new auditor in the Internal Audit department of Jenkins Manufacturing Company Jenkins Manufacturing Company (JMC) has been in business for more than forty years in central Texas and is a publicly traded company with ten subsidiaries. The company manufactures parts for computers, having jumped into the computer business when it was in its infancy back in the 60s. The Jenkins family still owns the majority stock of the company. The company has 12,000 employees that are spread all over the United States, Canada, Mexico, and Scotland in seven offices. The business has been solid for most of its forty years, and although it has had slowdowns during recessions, there have been very few times when the company had to lay off employees. The company's chairman of the board is James Jenkins, son of founder John Jenkins. The Vice Chairman of the Board is Jenny Jenkins Roberts, daughter of John Jenkins. Other senior executives are not members of the Jenkins family, but have been with the company, on average, 20 years. The company prefers to promote from within and offers stock options to all employees no matter what level they are. In order to become familiar with the audits that are conducted by the department, you have been reviewing working papers for previous audits. You note that two years ago, an audit was conducted of the purchasing function of a small division of the company in which the purchasing director. Thomas Brackens was extremely uncooperative. While that might be a fairly.common occurrence in audits, this audit was never completed. There is a notation in the file that the CEO of the company asked the department to conduct another audit of an area that had been having serious problems as soon as possible, which required all resources to be pulled to complete the CEO's request. The internal audit department had planned to finish the audit but never did. The auditors who worked on the purchasing audit have since left the company as has the internal audit manager. There were some notations that the auditors were having trouble locating some invoices and requisitions that had been selected for audit and that there were some purchases that looked like that had been split. A previous audit of the area was conducted without any major findings noted. In fact, there is a memo in the file from Jim Miller, the former director of purchasing (now retired) who thanked the internal audit for their assistance and that he would implement their recommendations immediately You decide that it is time to look back into this situation. There are too many red flags that say something isn't right. You bring it up to your manager who says to go ahead and check it out, but that if it's going to take more than 100 hours, you would need to let her know. Questions: 1 What red flags do you see that are troublesome? Practical Problem 1 2. What types of fraud could be occurring? 3. How would you check out this situation? 4. How would you approach Mr. Brackens? S. Develop an action plan