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Case Study example - Toy Central - Assessing the Possibility of Fraud and illegal Acts.

Case Study
Finance & Accounting
Pages 3 (753 words)
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Toy Central - Assessing the Possibility of Fraud Toy Central - Assessing the Possibility of Fraud 1. The Public Company Accounting Oversight Board has clearly defined ‘illegal acts by clients’ under AU Section 317. As in general case, AU Section 317 describes illegal acts as violations of laws or governmental regulations…

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The AU Section 317 clearly states that illegal acts may have direct or indirect impact on financial statements. Some illegal acts cause direct and material effect on the determination of financial amounts. In contrast, certain illegal acts raise material but indirect threats to the accuracy of financial statements. The next part of this section discusses with the “auditor’s consideration of the possibility of illegal acts”. This section specifically requires how auditors must respond to illegal acts that may have a direct or indirect impact on financial statements. In order to comply with AU Section 317, clients must have specific provisions related to the prevention of illegal acts. Such a provision is very essential for auditors to deal with illegal acts in the absence of specific evidence. This section also indicates that auditors must get all possible assistance from client staff in order to perform a good audit work. The AU Section 317 precisely insists that auditors should be provided with adequate information regarding the scope of the work. This section’s requirements particularly deal with due diligence that an auditor has to give while performing an audit work. 2. The identified payment to the International Workers Transport Union cannot be considered as an illegal act. The TCC’s VP-Operations requisitioned the payment. ...
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