Audit accounting

After reading Chapter 1 of your Forensic Accounting and Fraud Examination textbook, complete the following problems, which will help you apply your knowledge and begin thinking like an investigative accountant:

· Question 12 on page 13.

· Question 19 on page 13.

· Question 20 on page 13.

12. Mary Soto, the controller of the My Citizens Company, has gone over its inventory records many times and is concerned that one or more company employees has stolen large amounts of the company's inventory. However, she is not absolutely sure that any theft has actually taken place because large portions of the written and computer records are missing for unknown reasons. Still, rough calculations, based on total purchases and sales, show that perhaps 20 percent of the inventory is missing.

Mary spoke to her internal auditors and demanded that they give her an explanation, but they said no explanation was possible without the missing records.

What should Mary Soto do? Should she contact the police? Should she hire an external forensic accountant? How might a forensic accountant help in this case? Specifically, what could the forensic accountant do that Mary's internal auditors could not do?

19. Westag Mills Company is considering a merger with a competitor. Westag's CEO has hired a forensic accounting firm to investigate the competitor. What types of investigations could the forensic accounting firm conduct? What types of external assistance might the forensic accounting firm need?

20. Whom should you call first if you suspect fraud in your company, your forensic accounting firm, or your external audit firm? Why?