Audit Case - 1

Becky Price replaced her oil furnace with a propane furnace back in 2006, but the oil furnace’s pipes were still in place. Price canceled her contract for oil refills with High Pointe Oil Company, but there was a problem on November 2007, in which Price’s address was added to the list of oil fill ups and the truck driver filled up the oil pipes with 400 gallons of fuel oil which caused the destruction of Price’s house and her belongings. So, Price sued the company for the failure of not removing the oil furnace’s pipes, including for non-economic damages such as emotions and feelings.

Sears, Roebuck, and Co. came up with a productivity incentive plan to raise its profits in its auto centers. The mechanics of the auto centers used to be paid an hourly wage and the service advisors (employees who take orders and consult with the mechanics, then respond and advise the customers) were paid a salary. However, under the new plan, their payment was changed to include a commission component. With this new plan, mechanics and the service advisors were given a goal to sell a certain number of repairs during their shifts. The unethical behavior was derived from the change of compensation plan – the service advisors and the mechanics had mislead their customers and charged them for unnecessary repairs. When the California Department of Consumer Affairs accused Sears, Roebuck, and Co. in the 1192, for violating the Auto Repair Act, the Chairman and the CEO of Sears, Edward Brennan denied that such fraud occurred and said he’d take for actions

Owens & Minor is a distributor of surgical and medical supplies to hospitals and other health care facilities. Due to changing demand from customers, the company is facing increased operating costs, which has resulted in lower profit margins and even losses. In 1993, O&M recorded an $18 million profit, which was reduced to a loss of $11 million in 1995. The entire industry is experiencing similar difficulties. In an effort to resume profitability, O&M is evaluating alternatives to “cost-plus pricing”. Cost-plus pricing does not reflect the true cost of the services provided by O&M. Customers are demanding more of O&M while

The recent Time Magazine article "Post-Sandy Price Gouging: Economically Sound, Ethically Dubious," evaluates the recent price gouging by businesses during Hurricane Sandy (Futrelle). Examples of price gouging include raising prices on batteries and gas to astronomic levels, with the knowledge that the captive public audience will purchase the products regardless of the price. Businesses that have raised prices include bodegas, supermarkets and gas stations. Although such price gouging is undeniably an economically profitable business measure, the article argues that it is ethically dubious since it takes advantage of the public.

Describe what you believe is implied by the term “engagement risk.” What are the key factors likely considered by Deloitte and other audit firms when assessing engagement risk? How, if at all, are auditors’ professional responsibilities affected when a client proposes a higher than normal degree of engagement risk?

The Wisconsin minimum mark-up law (also known as the Unfair Sales Act), sec. 100.30, is a law that was passed in 1939 forcing retailers (gas stations) must markup their prices for motor vehicle fuel either 6% above what they paid for it or 9.18% above the average terminal cost advertised in their area, whichever is greater. One point to note is that the 9.18% is not the retailer’s marginal cost but it is a terminal price, which is more than likely higher than the gas station’s actual cost, putting consumers in a worse position. As the main controversy of the law lies within the premium pricing of gasoline, the law also applies to the sales of prescription drugs, alcohol, cigarettes, and other products sold within the store. When first

accused of overcharging consumers. Which federal law would have allowed the United States government to investigate this unfair method of competition?

Rush Johnson Farms Inc., brought suit against Missouri Farmers Association Inc., (MFA) for $4,094.60 which Johnson claimed to be the balance due for soybeans sold to MFA. This case presents for the first time in Missouri the question of

Furthermore, in Standard Oil Co., the Supreme Court stated that “The term "monopoly,"… as used in the Sherman Act was intended to cover such monopolies or attempts to monopolize as were known to exist in this country; those which were defined as illegal at common law by the States, when applied to intrastate commerce.” The Supreme Court went on to further state that “the principles of the common law applied to interstate as well as to intrastate commerce.”

Gull Oil Company sold the gas under its own name to approximately 15 stations in the area while Dompier Oil Company sold to approximately 8-10 stations under the Texaco brand. Although the president of Dompier did own 2 of the stations for part of the relevant time period, as wholesalers, neither company directly competed with the petitioners. Based on the original law, this would normally render the case irrelevant because a result of price inequalities from a firm does not implicate or make the supplier liable. It was decided that a violation would occur if “(1) the discount they received was not cost-based and (2) all or a portion of it was passed on by them to customers of theirs who competed with (the disfavored buyer)." (Pet. App. A8. ---4) The court then ruled that the burden by the plaintiffs had been proved. There was enough evidence to show that the gas stations that were provided by Gull and Dompier boosted sales while, correspondingly, injuring competitions’

Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.

The aim of this report is to develop an audit plan using the 2007/2008 annual reports of the WesFarmers. This report will provide an understanding of the underlying concepts of an overall audit strategy. This strategy will bring forward the direction and scope of the WesfFarmers audit plan. This report will address five major points these are as follows:

From the recent case data, ExxonMobil has not acted irresponsibility in pricing its gasoline products. Outside of the grocery industry, I have not heard of any business segments surviving on less than a 5% profit margin. In reading that ExxonMobil reported only a net profit of 8.5%3, it is difficult to state that the firm over priced its products to reap abnormal profits. Although Mr. Lee Raymond’s $400 million retirement seems grossly out of proportion in utilitarian terms, adding these funds back into the firm’s bottom line would not change the profit results. With profit margins of less than 10%, it is unlikely that ExxonMobil would be able to keep the price of gasoline fixed if sweet crude oil were to increase from $80 per barrel to $88. This 10% increase in raw material cost would have to be passed through to the customer in the form of higher prices for the firm to survive.

1. The two biggest concerns relating to possible fraud for the motel part of the business are: a) The couple failing to record hotel guest stays in order to steal the cash paid. By not recording the hotel stay their cash reconciliations would be clear.

* On the job training is the primary method for employees to learn policies and procedures.