QUESTION TWO

While auditing the financial statements of Revo Distributions, the certified public accounting firm of Henry and James discovered that its client's legal expense account was abnormally high. Further investigation of the records indicated the following:

Sthae.

i$.$ Since the beginning of the year, several disbursements totalling $$15,000$ had been made teu shang Le a clear unf poceedune for cash issbulemunts to the law firm of turner and Company.

ii$.$ Turner and Company were not Revo Distributions 'attomeys.

of Supphiers & vendus. Tony Zuze, the cash disbursements clerk. cach dis burkemuR and vecona

iv$.$ Tony Zuze's other duties included performing the end incompatible duties. twe $B$ a end$-$of$-$mon h bank reconciliation.

v$.$ Subsequent investigation revealed that Turne and company are representing Tony

Zuze in an ynrelated embezz.jement case in which he is the defendant. The cheques had been written in payment of his personal legal fees.

Required

b$.$ What control procedures could Revo Distributions have employed to prevent this unauthorized use of cash? Classify each control procedure in accordance with the COSO framework $($authorization$,$ segregation of functions, supervision, and so on$).$

$[16$ Marks$]$

c$.$ Comment on the ethical issues in this case.

$[9$ Marks$]$