You are an audit manager in VWX & Co, a firm of Chartered Accountants. You are reviewing threesituations, which were recently discussed at the monthly audit managers' meeting:1. VWX & Co has recently been approached by a potential new audit client, Bender Co. Your firmis keen to take the appointment and is currently carrying out client acceptance procedures.Bender Co was recently incorporated by Kieran Bender, with its main trade being the retailing ofwooden storage boxes.2. VWX & Co provides the audit service to Lom Co, a national financial services organisation. Dueto a number of errors in the recording of cash deposits from new customers that have beendiscovered by Lom Co's internal audit team, the directors of Lom Co have requested that yourfirm carry out a review of the financial information technology systems. It has come to yourattention that while working on the audit planning of Lom Co, Sabine Chomp, one of the juniorson the audit team, who is a recent information technology graduate, spent three hours providingadvice to the internal audit team about how to improve the system. As far as you know, thisadvice has not been used by the internal audit team.3. Fishy Business Co is a manufacturer of bottled drinks and has been an audit client of VWX & Cofor five years. Two audit juniors attended the annual inventory count last Monday. They reportedthat Brenda Mangle, the new production manager of Fishy Business Co, wanted the inventorycount and audit procedures performed as quickly as possible. As an incentive she offered thetwo juniors ten free bottles of 'Super Juice' from the end of the production line. Brenda also invitedthem to join the Fishy Business Co office party, which commenced at the end of the inventorycount. The inventory count and audit procedures were completed within two hours (the previousyear's procedures lasted a full day), and the juniors then spent four hours at the office party.Required(a) Define 'money laundering' and state the procedures specific to money laundering that should beconsidered before, and on the acceptance of, the audit appointment of Bender Co.
Question
You are an audit manager in VWX & Co, a firm of Chartered Accountants. You are reviewing threesituations, which were recently discussed at the monthly audit managers' meeting:1. VWX & Co has recently been approached by a potential new audit client, Bender Co. Your firmis keen to take the appointment and is currently carrying out client acceptance procedures.Bender Co was recently incorporated by Kieran Bender, with its main trade being the retailing ofwooden storage boxes.2. VWX & Co provides the audit service to Lom Co, a national financial services organisation. Dueto a number of errors in the recording of cash deposits from new customers that have beendiscovered by Lom Co's internal audit team, the directors of Lom Co have requested that yourfirm carry out a review of the financial information technology systems. It has come to yourattention that while working on the audit planning of Lom Co, Sabine Chomp, one of the juniorson the audit team, who is a recent information technology graduate, spent three hours providingadvice to the internal audit team about how to improve the system. As far as you know, thisadvice has not been used by the internal audit team.3. Fishy Business Co is a manufacturer of bottled drinks and has been an audit client of VWX & Cofor five years. Two audit juniors attended the annual inventory count last Monday. They reportedthat Brenda Mangle, the new production manager of Fishy Business Co, wanted the inventorycount and audit procedures performed as quickly as possible. As an incentive she offered thetwo juniors ten free bottles of 'Super Juice' from the end of the production line. Brenda also invitedthem to join the Fishy Business Co office party, which commenced at the end of the inventorycount. The inventory count and audit procedures were completed within two hours (the previousyear's procedures lasted a full day), and the juniors then spent four hours at the office party.Required(a) Define 'money laundering' and state the procedures specific to money laundering that should beconsidered before, and on the acceptance of, the audit appointment of Bender Co.
Solution
Money laundering is the process of making illegally-gained proceeds appear legal. It is a crime in many jurisdictions with varying definitions. It involves three steps: placement, layering, and integration. Placement refers to the process of introducing the illicit money into the financial system. Layering is the process of creating complex networks of transactions to obscure the money's origin. Integration involves merging the laundered money back into the legitimate economy.
Before accepting the audit appointment of Bender Co, VWX & Co should consider the following procedures specific to money laundering:
-
Client Identification: The firm should verify the identity of Bender Co and its beneficial owners. This can be done by obtaining documents, data, or information from reliable and independent sources.
-
Risk Assessment: The firm should assess the money laundering risks associated with Bender Co. This involves understanding the nature of Bender Co's business, its ownership and control structure, and the types of its customers and transactions.
-
Client Due Diligence: The firm should conduct due diligence on Bender Co. This includes understanding the purpose and intended nature of the business relationship, and conducting ongoing monitoring of the business relationship.
On acceptance of the audit appointment, the firm should:
-
Document and Report: The firm should document its findings and decisions regarding the acceptance of Bender Co as a client. If the firm suspects that Bender Co is involved in money laundering, it should report this to the appropriate authorities.
-
Training: The firm should ensure that its employees are trained in anti-money laundering procedures. This includes being able to identify and report suspicious transactions.
-
Internal Controls: The firm should establish and maintain internal controls to mitigate and manage the risks of money laundering. This includes having appropriate risk management systems, compliance management, and independent audit functions.
Similar Questions
You are an audit manager in VWX & Co, a firm of Chartered Accountants. You are reviewing threesituations, which were recently discussed at the monthly audit managers' meeting:1. VWX & Co has recently been approached by a potential new audit client, Bender Co. Your firmis keen to take the appointment and is currently carrying out client acceptance procedures.Bender Co was recently incorporated by Kieran Bender, with its main trade being the retailing ofwooden storage boxes.2. VWX & Co provides the audit service to Lom Co, a national financial services organisation. Dueto a number of errors in the recording of cash deposits from new customers that have beendiscovered by Lom Co's internal audit team, the directors of Lom Co have requested that yourfirm carry out a review of the financial information technology systems. It has come to yourattention that while working on the audit planning of Lom Co, Sabine Chomp, one of the juniorson the audit team, who is a recent information technology graduate, spent three hours providingadvice to the internal audit team about how to improve the system. As far as you know, thisadvice has not been used by the internal audit team.3. Fishy Business Co is a manufacturer of bottled drinks and has been an audit client of VWX & Cofor five years. Two audit juniors attended the annual inventory count last Monday. They reportedthat Brenda Mangle, the new production manager of Fishy Business Co, wanted the inventorycount and audit procedures performed as quickly as possible. As an incentive she offered thetwo juniors ten free bottles of 'Super Juice' from the end of the production line. Brenda also invitedthem to join the Fishy Business Co office party, which commenced at the end of the inventorycount. The inventory count and audit procedures were completed within two hours (the previousyear's procedures lasted a full day), and the juniors then spent four hours at the office party.Required(a) Define 'money laundering' and state the procedures specific to money laundering that should beconsidered before, and on the acceptance of, the audit appointment of Bender Co.
he audit process is
What is Auditing?5
audit procedures
.Question 3How is auditing related to accounting?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.