FNSACC516 Implement And Maintain Internal Control Procedures - Assessment 1

Task 10 Monitor internal control operating procedures

The treasurer of Skyline Views Motel was angry. He said:
“Our auditors, Blue Ribbon Auditors, have been associated with some of the firms I’ve worked in for years, and they have always been thorough and ethical professionals. I now discover that Mark Blue is married to Skyline Views Motel Marketing Director and that James Ribbon is the Chairman’s nephew. To make matters worse, Skyline Views Motel gave Adrian Blue (a relative of Mark Blue) a loan of $350,000 for his home - borrowed from Skyline Views Motel’s finance subsidiary. The finance subsidiary has no power to lend to non- executives, but it did! Now I am told that Mark Blue and James Ribbon together with their partners all have shares in Skyline Views Motel which is just under 10 per cent of the paid-up capital.”

Required:
Discuss the situation. Who has a problem and what is it?
Should the external auditors take on the audit?

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