How Control Weaknesses Can Lead to Fraud

In your Discussion, you will be faced with a potentially fraudulent situation. This is something that you might face in your auditing career as well. How would you handle these types of difficult situations?

You are auditing the internal controls of the Kemmons Corporation and you have found several material weaknesses in their system. You discuss the internal control weaknesses with the president. He states that he will make the necessary changes personally and tells you that there is no need to tell the board about the weaknesses. He does not want to bother the busy board members with these details, and he states the board is only involved with major items such as policy changes.

• As a new auditor, how would you respond to the president?
• If you were the audit partner on this engagement, would your response change? Why or why not?