Internal Auditor

Lisa Johnson

Financial Accounting

August 7, 2018

Case Topic Area :

1. Professional Competency - General (Gail Wu failure to accept assignments only when qualified by education and experience)

2. Professional Integrity - General (All the employees, Failure to be honest, fair and objective)

3. Client/Corporate Confidentiality (Failure to protect sensitive information)

4. Data/Information Representation and Communication (Failure to report and/or represent objective findings, such as misrepresenting information about receivables and inventory; failure to inform appropriate parties when professional judgment indicates that there is an unacceptable level of risk)

TITLE:  Case 1

"Internal Auditor”

CASE SUMMARY

Mark Hobson is an internal auditor hired by a company to run an audit of the company’s assets.  One of Mark’s major job responsibilities was to complete an audit of Avil Division.   The audit is important in determining the proper recording of accounts receivables and unused product.

Mark observed two flaws while doing his audit, first was a material dollar amount of inventory on a part was still being report on Avil’s books when the product was no longer being manufactured. The second flaw Mark found was some of the accounts receivables where still being carried over as collectibles instead of being sent to collections or written off. Mark reached out to Brenda the administrative assistant first about why she filed the report instead of the accountant and second why did she record the information in the manner that she did. Brenda explained and told Mark no one is being affected and everyone will get their bonus in the end not to worry about it.

Mark drafted his report with his observations about the flaws regarding inventory and receivables and took his findings to the district manager; Hal Wright. Hal responded “Gee, Mark, this couldn’t come at a more awkward time because our numbers passed through the outside auditors.” He proceeded to tell Mark not to make a big fuss about it because the independent outside auditors will notice them writing off inventory and adjust the profit accordingly. Hal continued to criticize Mark’s report telling him they will look further into next year so everyone can get their bonuses.

However Mark’s discouragement with how the situation was being handled he continued to follow the chain of command and took his findings and concern to the Internal Audit Director, Gail Wu. Gail was new to the position and have no previous knowledge of Internal Auditing, however just like the others Gail swept the issues under the rug for the sake of the bonuses that was coming out because of the reports that went out stating they were in good standing.

DILEMMA

Mark feels troubled and knows that something should be done about the inventory and receivables reports.  Comstock could have had better procedures in place Mark would not have had to deal with the untruthfulness of others within the company. I believe had Comstock managerial staff had done a better job at monitoring Avil and its reports when others come in to do their job correctly and get a negative response there will be other measures that Mark could take to get his report out and in the proper hands. Often times when people lose their integrity they will do anything to get by.