Instructions:

This is an assignment in Internal Auditing. It is ordered as: Chapter 2 (Mark Hobson / Comstock Industries) Grading Rubric

Summary of Case:
Mark Hobson is an internal auditor employed by Comstock Industries. He is nearing completion of an audit of the Avil Division. While conducting his audit, he uncovers two observations that could be material to the division’s financial statements. He brings his concerns to the division manager who needs to make his numbers and to his internal audit director who agrees with management that it is best for everyone to leave the observations alone and not bring them up to the Board of Directors. Mark turns to the IIA’s Code of Ethics in order to decide what further action to take.

Learning Objectives:
1. Familarize students with the IIA’s Code of Ethics.
2. Require students to think critically about the ethical issues raised in the case.
3. Assess student written communication.

Case Requirements:
Read Case 2, pages 2-37 to 2-39, of your textbook and prepare a 2 page (single-spaced, 12 point font) memorandum to the file. You will be writing the memo as though you are Mark Hobson. Include Facts, Issues, Conclusion, and Discussion Sections. In the Facts section, concisely state the facts of the case. In the Issues section, concisely state the two issues €“ how to treat the A2 inventory and whether to write off receivables over 180 days old. In the Conclusion Section, concisely state the action you as Mark will be taking with respect to inventories and receivables. Try to really imagine yourself in Mark’s shoes. Would you have the courage to take the action you are proposing? If not, what is a more realistic plan of action? In the Discussion section, discuss why you have chosen the plan of action you have outlined in the Conclusion Section. In your discussion refer to the IIA’s Code of Ethics and identify three specific Rules of Conduct relevant to your decision.