I need help with six questions related to the attached article of 'Angel Food Ministries Leaders Sentenced in Money Laundering':
1) As an auditor, how do you evaluate the qualitative factors related to the fraud in the attached article which resulted in financial misstatement?
Qualitative Factors to Use:
a. whether the misstatement arises from an item capable of precise measurement or whether it arises from an estimate and, if so, the degree of imprecision inherent in the estimate14
b. whether the misstatement masks a change in earnings or other trends
c. whether the misstatement hides a failure to meet analysts' consensus expectations for the enterprise
d. whether the misstatement changes a loss into income or vice versa
e. whether the misstatement concerns a segment or other portion of the registrant's business that has been identified as playing a significant role in the registrant's operations or profitability
f. whether the misstatement affects the registrant's compliance with regulatory requirements
g. whether the misstatement affects the registrant's compliance with loan covenants or other contractual requirements
h. whether the misstatement has the effect of increasing management's compensation - for example, by satisfying requirements for the award of bonuses or other forms of incentive compensation
i. whether the misstatement involves concealment of an unlawful transaction.
2) What is the most significant qualitative factor? Describe the fraud and the qualitative factor.
3) How would you evaluate that factor from a reasonableness standard?
4) As the auditor, what additional information do you feel would needed in order to make an informed judgment?
5) What would be other positive or negative factors within the organization that would influence your evaluation? Specifically explain each factor.
6) What would be your recommendation to management on how they could improve internal control in order to prevent the fraud and improve the qualitative factor in the future?
a. The main fraud is that money that was supposed to provide food to the poor was spent on the personal needs of the founder and his family. Every item is capable of precise measurement.
b. The misstatement masks a mismatch between the funds allocated for providing food to the poor at discounted rates and the funds actually spent for the purpose.
c. There is no attempt hide a failure to meet analysts' consensus expectations for the enterprise.
d. The misstatement attempts to show that misuse of money was actually bonus paid to Wesley Wingo' family members.
e. The misstatement concerns the family members of Wesley's who worked for Angel Food Ministries and played a significant role in Angel's profitability
f. Misstatements affect the Angels' compliance with regulatory requirements. Angel is tax exempt ministry and siphoning off ministry's money compromises compliance with regulatory requirements.
g. Misstatements affect Angel's compliance with requirements of ...
The solution provides you a structured explanation of money laundering at Angel Food Ministries . It also gives you the relevant references.