In: Accounting
While conducting a routine internal audit, Penny Felds overheard one of the 3mpany^ prime s purchasing agents bragging about receiving a substantial discount on a new SUV from the company's supplier of fleet cars. There sufficient predication to initiate a fraud examination? True or False
Yes it is true that the internal auditor has sufficient reasons to analyze for any fraud and initiative such actions. Audit is very important for a firm. It is mainly carried out to bring transparency on all financial transactions that are associated with the business. In order to eliminate any hinderence or un cover any cover up relating to financial information, an auditor needs to scrutinize all information thoroughly be for arriving to a conclusion regarding a transaction. If this scrutiny of information is not made well, the conclusion that the books are true and fair , which Is made by the auditor will be false. Such reports would not revel the clear picture of financial position and state of an entity. Therefore scrutenity of information made by the auditor , whether or not an indipendent auditor or an internal or managerial person is very important for concluding the transparency of information using which the books were prepared . Any event that generates a suspicion should not be overseen unless such suspicion is proven to be wrong. This is very important in audit. The event narrated at requirement details certainly generates a suspicion and the internal auditor should not withdraw from investigating about what he had over heard, unless his suspicion is proven to be wrong by all means. Therefore it is very true that there are sufficient reasons or predictions to initiate a fraud analysis other wise any cover up of deal if, already initiated will affect the transparency of the information related to the books of account and for the reason that such incidents of fraud is certainly very harmful for the financial health of the organization.