Assume the role of an expert witness who has been asked by a court of law to assess whether and to what extent Koss management and Grant Thornton were responsible for failing to prevent or detect the embezzlement and accounting fraud. Write a two-page professional opinion summarizing what you believe went wrong, and whether and how Koss management and Grant Thornton failed in their

Question

responsibilities. Cite specific examples to support your conclusion. Conclude your report with an assessment of whether Koss management and Grant Thornton should be held at least partly responsible for failing to prevent or detect the fraud.

What will be an ideal response?

Answer 1

Student responses will vary, but the expert witness report should be well organized, with appropriate
headings, and should be written clearly and professionally. It should clearly establish the responsibilities of Koss management to establish and maintain effective ICFR and cite specific examples of how it failed in those responsibilities. The report should also clearly explain the responsibilities of financial statement auditors in understanding internal control over financial reporting in order to appropriately plan a financial statement audit, while recognizing that Koss was a smaller public company and therefore
not required to obtain an audit of ICFR, and also in detecting material misstatements in the financial
statements, whether due to error or fraud. Examples should be cited that indicate that the audit firm
may not have fulfilled its responsibilities. Excerpts from an actual expert witness report that was
submitted by one of the casebook authors in connection with Koss-related litigation is provided at the
end of the case solution materials below. The report can be used as a model for instructors in grading
students’ responses, or the instructor may choose to share excerpts with the students to illustrate the
role of an expert witness in audit-related litigation. The expert witness report was filed in the state of
Wisconsin, which is an open-records state.