Procedures in Collecting Forensic Evidence
The following are some irregularities found in the Apollo Shoes Case that shows there are possible frauds exist:
1. Apollo’s minutes of October 18, 2007 shows that Mr. Unum, the VP of finance at Apollo Shoes refused the new auditing firm’s request to contact the old auditors. This may lead us to think that something might have happened during the previous audits.
2. Apollo’s minutes of June 30, 2007 shows that Apollo approved an advance of $1,000,000 to Mr. Lancaster (CEO of Apollo Shoes) as a personal loan to cover personal legal expenses. Mr. Unum later reclassified the loan as other receivable. This information gives us a “red flag” for possible misclassification. Further investigation is …show more content…
Investigators and auditors use a variety of sampling tools and techniques for examinations. One of the sampling techniques that the auditor uses to select a sample is Systematic Random Selection. When using Systematic Random Selection, the auditor selects a starting point from within the population and examines every nth item thereafter, where n is determined based on the number of items in the population and the necessary sample size. The reason to use systematic random selection method over others is its simplicity and the assurance that the population will be evenly sampled.
The auditor also use attribute sampling to test the effectiveness of internal control. When using attribute sampling, the auditor examines a subset of items within a population to determine the extent to which a particular attribute exists within that population. Another sampling tool used by the auditor is variables sampling. Auditors use variables sampling to perform substantive procedures to evaluate the fairness of an account balance or class of transactions. The variables under audit are typically the total population or the arithmetic mean.
How will you use analytical and inferential tools to evaluate accounting evidence?
There are two types of analytical tools: the associational tools and the temporal analysis tools. The associational tools are helpful to identify relationships among people, places, and organizations through diagrams