Audit 2023: Audit technology fit for the future

Summary

The transcript follows a group of professionals investigating potential fraudulent activities within a company. The team, led by Lucy and Clara, uncovers issues in New Zealand's sales performance, revealing potential misrepresentation of sales figures. Through data analysis, drone footage, and interviews, they discover a widespread fraud involving several employees, which includes inventory discrepancies and suspicious behaviors. The situation suggests that the New Zealand business may not remain viable without additional capital, and the team prepares to alert the board with a financial prediction.

Takeaways

• 😀 Charles Callan raised concerns about the sustainability of sales growth in New Zealand, triggering the need for further investigation.
• 😀 There is a suspicion of potential fraud involving sales misrepresentation in New Zealand, which needs to be reviewed.
• 😀 Financial and employee data, brand metrics, and market performance will be analyzed as part of the investigation.
• 😀 The sales growth of 20% in a stable market, alongside increasing customer dissatisfaction and 40% employee attrition, raised red flags.
• 😀 A deeper audit is required, with the board needing to be notified about the possible fraud.
• 😀 Drone surveillance will be used to assess on-ground activities in New Zealand.
• 😀 Interviews with key executives are being arranged to gather more information about the situation.
• 😀 Clara is tasked with reviewing data and drone footage to gain further insights into the fraud situation.
• 😀 A fraud specialist, Laura Schmidt, will be contacted to help identify the extent of the fraud and the individuals involved.
• 😀 Findings from the drone footage suggest discrepancies between inventory and customer orders, indicating fraudulent sales practices.
• 😀 There are correlations between the fraudulent activities and employee behavior, suggesting that more than just the sales teams are involved.
• 😀 The New Zealand business faces a serious risk, with no additional capital likely leading to it becoming a non-going concern due to a bank covenant issue.

Q & A

What issue did KPMG Clara identify overnight?

KPMG Clara identified a potential issue regarding sales growth in New Zealand, which may not be sustainable, and this was flagged by Charles Callan.

Why does Charles Callan feel concerned about the sales growth in New Zealand?

Charles Callan is concerned that the sales growth in New Zealand may not be sustainable, suggesting potential risks to the business.

What action did the team take to investigate the issue?

The team decided to conduct a deeper investigation, involving data analysis, drone footage review, interviews with key executives, and involvement of a fraud specialist.

What was the initial finding regarding the sales figures in New Zealand?

The sales growth in New Zealand was reported to be 20% in a stable market, but customer dissatisfaction was increasing, and employee attrition was high, particularly in finance and customer support.

What did the analysis reveal about inventory and customer orders?

The analysis revealed that inventory levels did not match the claimed customer orders, indicating that sales were being artificially inflated.

What signs pointed to a potential fraud in the company?

Signs of fraud included consistent leaving times, coded email language, and suspicious behavior during interviews, indicating involvement beyond just the sales teams.

How did the team plan to address the fraud issue?

The team planned to send drones to review activities, conduct interviews with key executives, and bring in a fraud specialist to assess the extent of the fraud.

What were the financial implications for the New Zealand business?

The financial implications suggested that without additional capital, the New Zealand business may not be a going concern, and it faced a potential bank covenant issue.

What was Clara's role in investigating the situation?

Clara was responsible for reviewing and processing data, drone footage, communications, emails, and messages, and ultimately sharing the findings with the fraud specialist.

What is the predicted outcome for the New Zealand business?

The prediction is that the New Zealand business will not be a going concern without additional capital and will face significant challenges, including the risk of bankruptcy.