Koss Corporation Case Solution

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Koss Corporation Case Q1. From the Koss Corporation case, we can see that there are many aspects are not functioned properly in the accounting and internal control systems of Koss Corporation. First, the CEO’s supervision and regulation is weak, which means Michael has not fulfilled his responsibility of internal control. Sue initiate and authorize wire transfers of Koss Corp. funds to Sue’s personal creditors for over $16.3 million without requiring or obtaining Michael’s approval. And because Michael trusted Sue, Michael did not fully review the financials before approving them. Secondly, the related accounting system technology is old and cannot provide the sufficient controls. For example, Koss Corp.’s computerized accounting system was almost 30 years old. Moreover, the internal control of the company was also weak. There are not enough regulations and monitoring system for the daily accounting activities. For instance, management and auditors spend very little time reviewing the insignificance of petty cash account. So the five elements of internal control is not work well in this company. The control environment was not effective; there was no effective risk management, which helped the company to realize its objectives; control activities and monitoring are lack. Moreover, the CEO is ultimately responsible for the internal control who assumes primary responsibility for the system of internal control. The board of directors oversees management, provides direction regarding internal control, and ultimately has responsibility for overseeing the system of internal control. Q2. The first problem is that the boards members are not possess enough financial background. They cannot accomplish their responsibility of internal control because they do lack the related business and financial training. Secondly, there is weak board. The broad was not functioning

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