[1] Describe management’s responsibilities in implementingeffective internal control over financial reporting in a publiccompany.What responsibilities did Koss Corporation’s managementhave to prevent or detect the embezzlement and accountingfraud?
[2] In what ways did Koss management fail in itsresponsibilities relating to internal control over financialreporting? Note: Please be brief but be specific—considerorganizing your response in accordance with the components (andprinciples) of COSO’s 2013 Internal Control: Integrated Framework(which can be found at www.coso.org).
[3] As Koss Corporation’s financial statement auditor, whatresponsibilities did Grant Thornton have to detect the embezzlementand accounting fraud? List and briefly describe at least three redflags that could have alerted the auditor to the fraud.What auditprocedures might the auditor have used to address those red flagsin order to discover the accounting fraud and the embezzlement?
[4] Based on the information presented in the case, do youbelieve Grant Thornton failed in its responsibilities to providereasonable assurance that Koss Corporation’s financial statementswere presented fairly in all materials respects? Justify youranswer using specific arguments and examples. Include in youranswer an assessment as to whether you believe an $8.5 millionembezzlement in a single year at Koss would typically be consideredmaterial by most auditors, and why.
[5] Assume the role of an expert witness who has been asked by acourt of law to assess whether and to what extent Koss managementand Grant Thornton were responsible for failing to prevent ordetect the embezzlement and accounting fraud.Write a two-pageprofessional opinion summarizing what you believe went wrong, andwhether and how Koss management and Grant Thornton failed in theirresponsibilities. Cite specific examples to support yourconclusion. Conclude your report with an assessment of whether Kossmanagement and Grant Thornton should be held at least partlyresponsible for failing to prevent or detect the fraud.
[6] List and briefly justify three or four specific steps thatyou believe would be most important for Koss Corporation to moveforward after discovery of the fraud.
