MOS 1023- Fraud ch 5
Income Tax: Non profit organizations will not have to undergo an income tax audit
The use of accounting knowledge in the courtroom is referred to as accounting
knowledge. When filing income tax for a corporation (Revenue Canada)
Permenant Differences- an expense report deducted from net income (50%) can be
deducted for tax purposes for food.
Internal Audits: Employed by th companies there auditing, the goal is to be independent,
objective, add value or oganization and provide auditing activities. They may not een
look at the financials, they want to become more efficient. These people work for the
company so vpof internal audits would fall under the ceo. How can you be objective
when you are under the hub of your boss? The reporting of the findings. World Com
was discussed (an auditor found 5 million dollars of unaudited computers) By 2001that
company had reported 3 billion in costs that should have been expensed. This was one
of the biggest frauds. Internal auditors also provide financial actiity, are the internal
controls being followed? Are the assets protected? Do the right people have access to
the right information? For example ..... Small companies tend not to have this
department, larger companies do to gain control.
If you are a publicly traded company on the stock exchange then you must go through
an external audit. Small companies or publically held companies don't have to go
through an audit but they might want to. When purchasing a business the buyer would
get an audit done to see if the building is as good as it says.
Neutral Third Party Review: someone that comes in and does an audit. Its debatable if
this person is truly neutral. If this wasnt there then investors and creditors would be
Accounting Vs Auditing
The auditor does not prepare the statements. They are looking at evidence because
they can’t watch every transaction done so they look at evidence reported. They verify
this has been reported in the correct framework. Did it meat the definition of an asset?
liability? Is it in compliance with the report? The report states that the company is or isnt
in compliance with the report. They verify that they are in accordance with the
framework and have a neutral opinion. Its telling investors that the information available
is correct and reliable. Auditors try to reduce the risk (not responsible to reduce all of it)
Business Risk- risk