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ki77a [65]
2 years ago
10

The officers of an oil refiner, trader, and hedger based in New York were arrested by the FBI for committing massive financial s

tatement fraud. The executives used many schemes to perpetuate the fraud, one of which was to hide a $30 million accounts payable from the auditors and show it as a payable arising in the following year. To conceal the fraud, they altered purchasing records, using correction fluid, and provided only photocopies of the records to the auditors. The Big 4 firm that audited this company was later sued for audit negligence in not finding this fraud.
Required:
In your opinion, were the auditors negligent for accepting photocopies of purchasing records and not detecting this accounts payable understatement?
Business
1 answer:
k0ka [10]2 years ago
8 0

Answer:

Yes. The auditors were negligent for accepting photocopies of purchasing records as these are <u>not sufficient audit evidence</u> to base a opinion on.

Explanation:

As part of their professional skepticism, auditors must obtain sufficient audit evidence.

Audit Evidence must be reliable and relevant to be considered <em>sufficient</em> for the auditor to base their opinion.

Photocopies were not reliable as they do not contain the original signatures responsible personnel and may be altered.

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The answers are:

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Answer:

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