During a calendar year audit of Avelis Industries Inc., an established espresso machine wholesaler, the auditing firm discovers that several checks are out of sequence on the subsequent month’s (January) bank statement. After further inquiry, it is discovered that Katie Larello, the company’s president, takes a 2 week break at the end of each year. Before she leaves, she signs a number of checks and leaves them with the controller in the event any payables come due while she is away. In your initial post, answer the following questions:
- Discuss the inefficiencies in Avelis’ internal controls.
- What role does the auditing firm have in discovering fraud related to this weakness within Avelis’ internal controls?
- With regard to the audit plan, what type of response should the auditing team make with this new information?
