Accounting Department Of The American Food Suppliers

I was immediately intrigued from the beginning of Food, Inc. There was interesting and valuable information brought up during the film. Many people do not think about where their food comes from. I believe that if people were to know where their food comes from, they would not want to eat it. There are 47,000 products at a grocery store. But, Food, Inc. implies that this is in fact an illusion because all of them are made with the same crops. The fact that there are only a few multi-national corporations that control all of the crops and meat production is a huge surprise. I believe that each person in society would be absolutely shocked if they were to watch this documentary.

Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company.

The auditor must remember that all information collected during the audit needs to be sufficient enough to further the audit process. The information must not only possess the two qualities, relevance and reliability, but it should also test various assertions. For instance, in the audit of Walmart, the auditor should make an attempt to acquire information such as financial statements from the company’s bank, as opposed to acquiring the statements from Walmart’s management. Taking such crucial information from Walmart’s management will put the reliability of that information into question. It is possible that management may manipulate the financial statements, so that they are more appealing to the public and investors. Management may do things

2 Managing fraud risk: The audit committee perspective Fraud in a fi nancial statement audit

Although this practice was not fraudulent, the plaintiffs insisted that Campbell had a responsibility to record a reserve or allowance in anticipation of substantial customer returns likely to result from theses “sales.” Despite the fact that a large percentage of product sold under guaranteed sales contracts was returned, the company’s accounting staff apparently never recorded appropriate reserves for those sales returns. The plaintiffs charged that PwC must have known about Campbell’s bogus sales, but

in order to obtain stronger or more persuasive evidence, the “bank balance” reported by the

The audit team focused on preforming groundwork analytical procedures. A comparison of the performance of Smackey’s Dog Foods Inc to other similar industries was used to validate the original assessment of the risks. Performing the procedures helped detect areas that pose a high risk of the material misstatements. Another important part of the planning of the audit was to set a balance of materiality that is appropriate. The situations that

This memo is regarding Hamilton Corporation and the fraud that occurred. When people make decisions they don’t always do it with the right mindset. There are limitations in our judgment processes and we can identify methods to mitigate bias and improve judgment (KPMG Judgment Framework). The four common tendencies that cause limitations in our judgment processes are, availability, confirmation, overconfidence, and anchoring. In this memo I will explain each of the four tendencies, talk about which tendency I believe to have manifested in the Hamilton case, clarify issues relating to auditing the warranty reserve and describe the alternatives that should be considered in auditing the warranty reserve, and finally provide factors that

[pic]s a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Central Corporation (TCC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TCC’s sustained profitability, so that they can be brought to the attention of the company’s board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting.

There are various procedures that could be taken in to account that would, if properly implemented, would have detected the frauds that occurred within the companies. There are many control risks that should have been taking regarding inventory along with preliminary audit strategies for the inventory and substantive test to be done that would have raised many flags during the typical audits as well as in depth ones.

This subject company in this case study is WoolEx Mills. The top management team at the Mills had to act fast to prevent the accusations charged upon them, so that they may venture deep into the United States market. In the process, they had to act in a way that will present the company’s financial statements; cash flows in a way that they did not show any suspicious fraudulent activities. The type of fraud in this case study is known as manipulation of accounts which involves the act of offering the accounts in the way they are not in reality.

As the Independent Auditor I would require from Pinnacle, the client a Management Representation Letter. This is a letter an auditor is required to obtain from management at the conclusion of fieldwork, confirming representations explicitly or implicitly given to the auditor, indicating and documenting the continuing appropriateness of such representations, and reducing the possibility of misunderstanding regarding the representations.

The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)

This essay explores the corporate collapse of Harris-Scarfe on April 3 2001, which before their collapse was Australia’s third largest retail group (Buchanan 2004, p. 55). It will explore the collapse in the context of the auditing framework. In particular, how the financial indiscretions were not discovered by the auditors, which were going on as early as six years prior to the collapse (Buchanan 2004, p. 62). To start with, we define what the auditing objective is in order to work out where it failed in this case. ASA 200.11/ISA 200.11 defines the auditing objective as one that needs to ascertain reasonable assurance that the financial report as a whole is free from misstatement, whether due to error or fraud. In doing so the auditor can give an opinion of whether the financial report was prepared in accordance with the financial reporting framework (Gay & Simnett 2012, p. 12).

Following the risk assessment procedures, substantive procedures are designed and conducted to detect material misstatements of relevant assertions. Substantive procedures include analytical procedures and tests of details. Analytical procedures involve evaluations of financial statement information by a study of relationships among financial and nonfinancial data. Tests of details may be divided into three types. One test is the test of account balances to address whether there are misstatements in the ending balance of an account. In the case of Crazy Eddie, auditors should have put greater attention to inventory and accounts payable accounts. The second test is a test of classes of transactions to determine whether particular types of transactions have been properly accounted for during the period. Crazy Eddies fraudulently classified these transshipping transactions as retail sales to inflate its sales revenue and continue growth at existing stores. A key ratio for retailers is to compare growth in existing stores to growth from new stores. The third and final test is a test of disclosures to evaluate whether financial statement disclosures are properly presented. Crazy Eddie prepared bogus debit memos of over $20 million to understate accounts payable.