Using Professional skepticism, identify and explain the fraud risk factors that your audit team has to keep an eye out for during your audit of Omancell

Using Professional skepticism, identify and explain the fraud risk factors that your audit team has to keep an eye out for during your audit of Omancell

Guidelines and further information about assignment:
Assignment must be submitted with the “Turnitin” report. If the report generated indicates a similarity index percentage of 20% or more, a review of your assignment is necessary to ensure the same is reduced to less than 20%.

Student declaration:

I certify that the work contained in this assignment was researched and prepared by me:

Signature: ___________________________ Date: ___________________

Submission time and date

You should submit the assignment by the time and date mentioned otherwise a ‘NA’ will be awarded. Fill in the form cover and staple it with your assignment. Make sure that all the relevant details are complete. Assignments must be submitted by the due date. You may include diagrams, figures etc without word penalty.

Plagiarism Writing

1. Plagiarism occurs if you use somebody else’s work in an assignment or exam answer, but fail to state where you got the material from. You need to be also very careful about the amount of words you are using from somebody else’s work.

2. It can happen in any type of assessment where you are given the questions or tasks in advance.

3. If another student uses your work in his/her answer(s), both you and he/she will be punished when caught.

4. Punishments for committing plagiarism can be very severe.

Using Professional skepticism, identify and explain the fraud risk factors that your audit team has to keep an eye out for during your audit of Omancell

Details

Plagiarism is a form of cheating in which students use the work of others and present it as their own. It may include all or any one of the following –

1. Copy extensively from the work of others (from sources such as books, magazines, journal, web-sites etc) and submit the work as your own.

2. Copy another students’ work and submit it for assessment under your own name.

3. Allow another student to copy your work and then submit it for assessment under their own name.

What happens if you get caught?

The examining body of CBFS may punish offending students in any manner that they deem fit. Typical punishments may range from reduction in grades, making students re-sit modules and even failing students on a module or an entire award. The college considers this form of cheating as a serious offence. Therefore be forewarned!

Scenario

You are the audit manager of Ahmed and Saif Chartered Accountants. You are at the planning stage of the audit for Omancell for the year ended 31 December 2021. Omancell is a high-end retailer of latest flagship model mobile phones. Given below are the notes that you have made following a meeting with Mr. Omar, the financial controller:

Omancell has been facing tough competition in the market. The Covid pandemic has worsened it, as customers now prefer online retailers. This has resulted in physical retailers going out of business.

A new management structure has been implemented. There are new divisional managers appointed with the shop managers reporting to them. There are approximately 10 shops under each divisional manager. The divisional managers have been given challenging financial targets, with substantial incentives linked to these targets, with the aim of motivating them to achieve it. In the previous board meeting it has been decided to cut the bonus amount paid to the shop staff for the festive season.

In response to the recommendations made in the previous year’s Report to Management, Omancell has brought a couple of new changes. Firstly, the company has also sold several of the shops they owned under the sale and leaseback arrangements and have made a gain on the same. They have also put a new inventory management system into place. In the initial months after implementation, there were difficulties in the operation of the system. However, a detailed report has been submitted to the Board in their previous meeting, by Abdullah, the chief accountant, confirming that the issues were fixed and now the system is producing reliable information for Omancell’s use. Omar commented that Abdullah took the initiative to sort the issues with the system, especially working long hours including weekends and refusing to take leave until the system was functioning well. The company has also sold several of the shops they owned under the sale and leaseback arrangements.

In the course of your work you also come across instances of non-adherence to management policies. When talking to a couple of divisional managers about this you understand that the divisional managers are unhappy with the large number of policies in place as it is time consuming to keep up. You also understand that they reluctant to have controls in place as they feel it is cumbersome and involves lot of paperwork.

Omancell is considering to raise new capital by share issue post year end, to finance an online presence to keep up with customers’ changing preference and also to expand into other Middle East countries. Hence, Omar has requested that the signed audit report be provided by 1st February 2022 (4 weeks earlier than usual). Omar has also offered to provide the latest flagship phones of high-end companies as a gift for their hard work.

Omar has completed CPA and, in his studies, and continuous professional development sessions heard about the need for accounts to act in public interest. Omar has requested that Fathima, an audit senior in your department be assigned to the audit of Omancell. Fathima does not have experience in audits of retail sector and has not been previously assigned to the audit of Omancell. On further investigation, you understand that Fathima is Omar’s niece.

During the year the company has established a pension plan for the employees. Omar has asked you to speak to the engagement partner about providing valuation services for the same.

a. Using Professional skepticism, identify and explain the fraud risk factors that your audit team has to keep an eye out for during your audit of Omancell. (15 marks)

b. Identify and evaluate the violations to ethical principles, including the nature of threats it poses. Also recommend suitable actions Omancell can take to mitigate these threats. (10 Marks)

Word Limit of 2500 word (10% + or -)

(Total 25 Marks)