Onics Corporation: Related Party Transactions and Auditor's Assessment of Fraud Risk - Case Study

• In Event: Auditing 4

Abstract

ABSTRACT: Related party transactions have characterized many accounting scandals and audit failures, notable of which are Enron and Adelphia. Section 402 of the Sarbanes Oxley Act prohibits personal loans to executive officers and directors, however, other types of related party transactions also considered as risk factors continue to be reported in significant numbers. This case presents information about related party transactions and other facts surrounding the investigation of possible fraud during the audit of Onics Corporation, a software services firm. You will be asked to evaluate the impact of the related party transactions on the risk of financial statement fraud and the monitoring effectiveness of the Board and Audit Committee. Special consideration will also be given to examining the implications of the related party transactions on the firm’s compliance with the Sarbanes-Oxley Act and Securities and Exchange Commission rules.



Key Words: Audit, fraud, related party transactions, board, audit committee

Authors

• Susan Sundai Muzorewa, Delaware State University

• Nana Yamfo Amoah, Old Dominion University

• Bilal Makkawi, Morgan State University