You are auditing a local state university. In the engineering department, you find that a number of endowed professorships and endowed chairs are vacant. In fact, there are more of these endowed positions than qualified faculty. Donors give monies to universities in the form of professorships and chairs to be given to specific faculty members. The professors then promote the endowed position by various activities (in other words, articles, grants, books newspaper articles, etc.). If there is no designated professor for one of these positions, the earnings accumulate within the fund. As an external auditor (or internal auditor), you find that the department is taking the earnings from the unassigned positions (a restricted fund) and using the monies for general uses. For example, a department head is assigned as many as five endowed professorships to be used in the department for various expenditures and those positions are unfilled. Thus, the department head is using endowment monies for discretionary purposes. Required: Since you read about money laundering in your fraud textbook and you also heard in the news that some universities like Stanford University were caught using Federal restricted funds for general use, you start to think about the following questions and record your thinking:

c. If you tell your audit supervisor about the departments activities and she tells you to forget about it, what would you do and what should you do? Explain.

d. If you believe this activity is a real problem, would you report it to anyone else?