Fraud Memo - Douglas CPAs is named as the previous auditor...

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Assignment 2 – Fraud Prepared by Venk Seealm Reviewed by Darlene Wardlaw Date: January 3, 2012 To: Darlene Wardlaw From: Venk Seelam, CPA Subject: Consideration of Fraud (SAS 99 – Fraud Detection) As the auditor, it is our responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, per the rules of Generally Accepted Auditing Standards (GAAS) and SAS 99. I did notice some questionable practices with the Apollo engagement. In the minutes from the October 18, 2011 meeting, it was stated that the former auditor, Smith & Smith, CPAs, unexpectedly withdrew from the engagement. The vice president of finance, Mr. Unum, declined to discuss this matter further, because there may be pending litigation involved. Also, in the work paper indexing document, a different auditor, Jones and
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Unformatted text preview: Douglas, CPAs, is named as the previous auditor. Mr. Lancaster seems to obtain too much power in the company as both the CEO and director of the board. Based on the business items from the 10-K there are many questionable inventory and equipment transactions that seems to be obtained through the directors authority with the shareholders money. Lancaster might be hiding or encouraging fraud in the company. CEO bonuses are much larger than those of other board members. It might be judicious to look over transactions that he is involved in. A $12 million lawsuit listed under their liabilities raises red flags on the companys future could be financially related or product related (i.e. patent, trademarks, and etc)...
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