Audit Evidence of Grande Store Case Essay

The case describes that, "...the accounting system could not be locked at the end of the month and there was no audit trail. Sachdeva and Mulvaney were thus able to make undetected post-closing changes to the books and bypass an internal control requiring Michael J. Koss to authorize those changes". These post-closing changes may be false entries done to hide theft during the accounting period. Further, because the reconciliations were done by the same people who initiated or recorded the transactions, the fraud could be covered up. For example, had one of them made an unauthorized purchase at a retail store where the expense were obviously not business related, they could have assigned the expense or expense description to a vendor where the transaction amount would have been normal. If the accounting system was not locked, they could have also just posted the transaction date back to a prior period that isn't likely to be reviewed.

The one pattern within the data that appears to be inconsistent yet if the auditors had established an internal control systems would be Monus the founder moving so freely throughout every aspect of the company with no one checking his movements. From choosing what properties to purchase to purchasing supplies. In any company there should be segregation of duties. For example, the person making the deposits should not be the person writing the checks. Had there been stipulations made it would not have been so convenient to commit the

Grant Thornton should be held liable for its reckless negligence because it ultimately prolonged Keystone bank’s ability to continue to partake in fraudulent activities. If the accounting firm would have held itself to GAAS, generally accepted as the minimum standard of professional conduct in performing an audit, Thornton would have known to exercise “heightened skepticism” during this high risk of fraud. Secondly, GAAS required written confirmations from third parties servicing assets in regards to a bank’s balance sheet. Not only did Thornton fail to obtain this written requirement, it also recklessly relied on an oral statement. GAAS also required in a high risk audit that monthly remittances of interest income on assets being serviced by

a) What does Commercial Fixtures do? What is their competitive position in the market place?

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

| Our firm - Chiu & Weisserman LLP has been appointed as the new auditor of the public company Dollarama Inc. for the current fiscal year-end as at January 29, 2012. Please find in the following pages a report on the audit plan that was used to conduct our audit for the year ended January 29, 2012. Even though the audit of 2012 was performed by PWC, the assumption used for this project was that our firm was the new auditor for 2012.

Elder, A. A., Beasley, M., & Elder, R. J. (2014). Auditing and assurance services (15th ed.). Upper Saddle River, NJ: Pearson.

It is not possible for the auditor to be 100% certain that he/she has obtained all evidence regarding all significant related party transactions, especially if management is trying to conceal something. However, the

Arens, A. A., Elder, R. J., & Beasley, M. S. (2013). Auditing and Assurance Services. Old Tappan, NJ: Pearson Education.

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

3. In testimony before Congress, George Greenspan reported that one means he used to audit the insurance restoration contracts was to verify that his client actually received payment on those jobs. How can such apparently reliable evidence lead an auditor to an improper conclusion?

During the planning phase of the audit, you met with Pinnacle’s management team and performed other planning activities. You encounter the following situations that you believe may be relevant to the audit:

E&Y auditors violated their responsibility to the public and to their profession. The auditing standards that were violated were AU 15 responsibility of the auditor to obtain sufficient evidence to provide a reasonable basis for his opinion, AU section 339 preparation and maintenance of working papers, AU 339.01 Principle record of work contains information and conclusions the auditors have reached concerning significant matters in the working papers, AU 339.08 the auditor is required to “adopt reasonable procedures for safe custody of his working papers and retain them for a period, AU 15 was violated when Trauger requested revisions to the workpapers. AU 339, AU 339.01 and AU 339.08 were violated with the

b. The bogus debit memos for accounts payable. – The most reliable form of evidence that the auditors could have obtained in this situation would be confirmations. The auditors should have sent confirmations to vendors, suppliers, and creditors confirming the amount that Crazy Eddie owed them. The amounts reportedly owed could then be matched with the amounts recorded in the company’s accounting records. Auditors should question any discrepancies.

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.