APM Wealth Management Company Harvard Case Solution & Analysis

APM Wealth Management Company Case Solution 

Answer No.2 (b)

Based the case discussed above, it seems that company had very low level of internal control systems. In addition, company was doing that particular practice for the last couple of years, increasing the doubts about ethical behavior of the company in complying the auditing objectives.

Five types of Audit Evidence

Physical Examination:

As the auditors should have physically verified few cases before giving his final judgment.


While checking the balances of current accounts, auditors didn’t find any error which means APM did not update their documents about the deceased customers, on whom accounts it was charging premium.

Analytical Procedure:

This evidence tool would be used to check the amount of account receivables in terms of incurrence premiums of old people.

Inquiry of the clients

As the customer complaints about the issue were registered two year before the identification of the issue so external auditor should have inquired about some of clients or customer complaints to get the facts verified.

Answer No. 3 (a)

In April, 2018 a customer of APM lost his 25% of TAL Super balance $68,000. The lost amount of nearly $16,189 was due to following the advice of APM ( (McGowan, 2018). APM later accepted its mistakes but didn’t compensated him after his loss which shows the company was not paying customer’s losses and was not showing it in their expense section of Profit and Loss statement. As a result company overstated its income without compensating their customers who lost their money. As per the laws of fraud and repayment, company should have refunded the amount to its customers.

Potential Misstatement

So, events like these increased the probability that company would do material misstatements in their financial statements because these events gave company cushion to hide its operational inefficiencies, while showing high profit margins in its financial reports. Moreover, this gave rise to doubts about the prevailing inherent risk in the company, which means there are more incentives to hide the adverse information which has potential to harm the image of company. In addition, these events helped company to manipulate their expense accounts, which inflated the operating income of the company and made it look attractive in the eyes of shareholders and it helped company to gain investor confidence by showing higher after-tax profits. This potential short-term benefit provided enough incentive for the company to materially misstate the accounts of financial statements.

Answer No. 3 (b)

Based the case discussed above, it seems that company had very low level of internal control systems. In addition, company itself failed to comply which means issue was internal and that gave rise to the doubts about ethical behavior of the company in complying with the auditing objectives. Which means company has low level of internal control.

Now we will discuss the following types of audit evidences, which will help auditors in identifying such issues:

Five types of Audit Evidence

Physical Examination:

This will provide medium level of evidence for the auditor as the issue was more related to the services of the company.


This will not provide enough evidence as the financial documents would not show the loss that company’s advice had given to the customers.

Analytical Procedure:

This evidence is very important in detecting such issue because if the losses account is not showing any negative figures and just positive figures which raises the doubts about company’s integrity that whether company is including the costs or not.

Inquiry of the clients:

This tool is very crucial and provides very high level of evidence because it helps in knowing the direct response of the clients.

 Answer No. 4 (a)

In April 2018, the news came in top line, when it was proved that, APM had mislead the Australian Security and Investment Commission (ASIC) and continued to practice its business by charging customers with fees without providing the required services. It was a fraud case and APM might face criminal charges for a regulatory authority of the country. It is said that junior managers were aware of the illegal practice and have informed senior management but they still continued the practice which meant there was very weak level of internal control in the company. Moreover, events like these increase the possibility of materially misstating the accounts of financial statement to mislead their shareholders as well because we have seen evidence of this, when Wilkins confessed this in front of public and apologized for letting down their shareholders.

Potential Misstatement

This type of fraud is practiced by the company when the company had low level of internal control and didn’t give preference to ethical behavior. As in this case, the problem was not unknown to the senior management of the company that means inherent control was at very low level in the company. Moreover, the practice continued because there was potential benefit for the company in the short run and due to this we can suspect that company would misstate its financial accounts in the future also, as this had already given huge capital loses in the form of decrease in the share price. However, this helped company to show higher incomes and show strong financial positions. Events like these have potential to make company manipulate its accounts.


Answer No. 4 (b)

On the basis of analysis of the issue discussed above, it seems that the company had very low level of internal control systems. Moreover, company intentionally mislead the regulatory authorities and shareholders, which means company had very high level of inherent risk. On the basis of evidence components of audit, such issue could only be find out by observing and detail careful analysis of the financial reports.

Types of Audit Evidence

Analytical Procedure:

Moreover, such issues rises due to the weak internal controls and lack of internal audit. So auditors should properly examine the expense accounts of the company and properly examine the services rendered against the receipts of the company.

Inquiry of the clients:

This tool is very crucial and provides very high level of evidence because it will  help to know the direct response of the clients which will further help in knowing exactly what customer’s opinions are about the quality of services provided by the company..........


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