Essay about Campbell Soup Company Audit

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Campbell Soup Company Background Campbell was founded shortly before the start of the Civil War. Abraham Anderson and Joseph Campbell began manufacturing canned vegetables and fruit preserves. In 1976, Campbell bought out Anderson’s interest and renamed the firm the Joseph Campbell Preserving Company. Later, Arthur Dorrance was Campbell’s new partner. In the early 1920s, John Dorrance, Arthur Dorrance’s nephew, was the sole owner of the Campbell Soup Company, which was the largest producer of canned soup products. Unfortunately, as the twentieth century was coming to a close, the nation’s appetite for condensed soup products was waning. The weakening demand prompted the company’s executives to use an assortment of questionable…show more content…
These practices are trade loading, improper accounting for loading discounts, shipping to the yard, and guaranteed sales. Trade Loading Campbell offered sizable trade discounts near the end of accounting period to entice customers to make product purchases that they would otherwise defer. By this way, a company can use price concessions to prop up its reported revenues and profits. Plaintiffs pointed out that PwC auditors were aware of the excessive trade loading by their client and this should have been a “red flag” for PwC to investigate the possibility that their client was fraudulently misrepresenting its operating results. The judge agree with the plaintiffs that PwC’s workpapers revealed the firm was aware of Campbell’s disproportionately sales near the end of quarterly reporting periods. However, the he disagreed with the assertion that PwC should have considered those heavy sales a red flag. Instead, he pointed out that PwC’s workpapers referred to the large, period-ending sales as a “traditional” trend in Campbell’s operating results. This “traditional” trend may apply to Campbell’s business environment, but may not to other industry. An auditor had better understand the industry environment he or she involves in to judge whether disproportionately sales near the end of quarterly reporting periods are normal or not. Improper Accounting for Loading Discount Whether PwC would remain a defendant was whether the audit firm realized that large

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