1. Designing effective internal controls is the responsibility of management in almost every company. In some cases, there are deficiencies in the internal control environment of a company. Consider how discrepancies between the design and the implementation of internal controls may occur within any given company.
Compare the designs of your choice of two internal controls. Determine which is the preferred design for the implementation of internal controls and why it is more likely to detect accounting irregularities. Provide at least two reasons why the preferred design for internal controls is more effective than the other design. Provide a rational for your choice.
2. The U.S. Securities and Exchange Commission (SEC) released its final rule to implement a code of ethics under SOX Title 404. The stock exchanges have proposed that each company listed on the exchanges publish its code of ethics.
o Discuss how disclosures of a code of ethics by senior management could have a positive effect on public confidence and influence investors’ behavior. Discuss the consequences of not establishing a code of ethics. Support your position.
o Evaluate the importance of senior management in setting the tone for the application of the company’s code of ethics and promoting positive employee behavior, improved decision making, or the willingness to report unethical behavior of coworkers.
o Recommend at least two policies that might encourage employees to report unethical behavior.
3. Imagine that you are a senior auditor, and your firm has been selected to audit a medium-sized company with a single location.
o Provide an overview of the company.
o Describe the four phases of an audit and discuss the key factors that would help you determine how to plan the audit for this company. Provide specific examples.
o Determine both the relationship of risks in the planning of the audit and factors that influence those risks.
o Speculate on which type of risk creates the most uncertainty for the auditor and recommend at least two ways to plan the audit to mitigate those risks. Provide specific examples.
