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Auditing Cases
Case 4.8 Koss Inc 1-7 please
Author: Mark S. Beasley
ISBN: 9780134422718
[1] Describe management’s responsibilities in implementing effective internal control over financial reporting in a public company.What responsibilities did Koss Corporation’s management have to prevent or detect the embezzlement and accounting fraud?
[2] In what ways did Koss management fail in its responsibilities relating to internal control over financial reporting? Note: Please be brief but be specific—consider organizing your response in accordance with the components (and principles) of COSO’s 2013 Internal Control: Integrated Framework (which can be found at www.coso.org).
[3] As Koss Corporation’s financial statement auditor, what responsibilities did Grant Thornton have to detect the embezzlement and accounting fraud? List and briefly describe at least three red flags that could have alerted the auditor to the fraud.What audit procedures might the auditor have used to address those red flags in order to discover the accounting fraud and the embezzlement?
[4] Based on the information presented in the case, do you believe Grant Thornton failed in its responsibilities to provide reasonable assurance that Koss Corporation’s financial statements were presented fairly in all materials respects? Justify your answer using specific arguments and examples. Include in your answer an assessment as to whether you believe an $8.5 million embezzlement in a single year at Koss would typically be considered material by most auditors, and why.
[5] Assume the role of an expert witness who has been asked by a court of law to assess whether and to what extent Koss management and Grant Thornton were responsible for failing to prevent or detect the embezzlement and accounting fraud.Write a two-page professional opinion summarizing what you believe went wrong, and whether and how Koss management and Grant Thornton failed in their responsibilities. Cite specific examples to support your conclusion. Conclude your report with an assessment of whether Koss management and Grant Thornton should be held at least partly responsible for failing to prevent or detect the fraud.
[6] List and briefly justify three or four specific steps that you believe would be most important for Koss Corporation to move forward after discovery of the fraud.