- 20 Marks
AAA – May 2021 – L3 – Q5 – Forensic Auditing
Explanation of forensic accounting, investigation, audit, related government agencies, ethical principles, and procedures for conducting a forensic audit.
Question
Judi Nigeria Limited is a company that manufactures bicycles. The company acquired M&M Tires Limited, a manufacturer of tyres, in the 2018 financial year. Six months after the acquisition, M&M Tires declared bankruptcy.
The management of Judi Nigeria alleged that there had been financial impropriety by the previous management of M&M and that the 2017 financial statements of the company did not show a true and fair view of its financial performance. The management of Judi Nigeria Limited also alleged that the auditors of M&M had been negligent in carrying out the audit.
The Managing Director has asked your audit firm to carry out a forensic audit to determine if the auditors were negligent in their duties.
Required:
(a) Distinguish among forensic accounting, forensic investigation, and forensic audit. (6 Marks)
(b) Identify the various government agencies associated with forensic auditing. (4 Marks)
(c) Apply the fundamental ethical principles to the forensic auditor’s engagement. (5 Marks)
(d) Describe the procedures to be adopted by an auditor in a forensic audit. (5 Marks)
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