Case Analysis of Sunbeam Corporation

Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences

MTC initially needed to obtain substantial investment capital due to two main factors: a research-heavy industry, and the need to create most of the markets for its products. Although the founders' goal was to become a major manufacturing company, they did estimate that the company would need $50 million in capital before it would become self-sufficient. Their initial financing model was to first recruit a superior technical team, use that to attract additional equity investment and development funding from interested corporations, and then develop manufacturing capabilities. Commercial sales began 2.5 years after inception, and MTC is nearing the break-even point in 1990.

) There was a lack of adequate cut-off procedures to ensure the timely recording of certain period-end accruals. This resulted in an audit adjustment of $3,578,000. The benchmark for overall materiality is $3,508,000, I would consider the audit adjustment of $3,578,000 a material misstatement. Control environment, principle 2 the board of directors and management exercise oversight of development and performance of internal controls. Due to the severity and material weakness of lack of adequate cutoff procedures to ensure timely recording of period end accruals. Management and the board of directors should evaluate performance of internal control activities including adherence to standards of conduct and expected levels of competence. In

al, 2012, p. 214). Therefore, a material misstatement may not be detected during the audit. In addition, the audit may not detect errors under the materiality level, whether resulting from error, fraud, or misappropriation of assets. Anderson, Olds, and Watershed may decline to express an opinion or issue a report if the firm is unable to complete the audit for any reason.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate (Louwers & Reynolds, 2007). We believe that the audit evidence obtained is sufficient and appropriate to provide a reasonable basis for our opinions.

Star River Electronics Ltd. is a large manufacturer and supplier of CD-ROMS based in Singapore. It was founded as a joint venture between an Asian venture capital firm, New Era Partners and Starlight Electronics Ltd, UK. It has enjoyed a great deal of success in the past, due in large part to their excellent reputation for producing high-quality discs.

Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.

Potential for misstatement & fraud: Compliance with the established procedures and controls were found to be ineffective. The fraud reporting process, technically put in place does not serve its intended purpose. The ineffective control environment has created an attitude and tone across the company where errors and inappropriate behavior may be seen as acceptable, thus creating opportunity for concealing fraud and potential misstatements.

Suncor Energy is a company I would like to work for because they have a solid foundation for both business and employee success. Also, the company has an achievement- oriented culture, enormous opportunities for career growth, a very competitive compensation package, an industry leading experience and a great reputation for social and environmental responsibility.

During the performance of this integrated audit, require numerous judgments about the internal control and overall financial reporting and how well it addresses risks of material misstatements within the financial statements (AICPA, 2014). After re-evaluating the previous errors found from the previous audit, the audit team found the corrective actions to be appropriate and justified in elimination of human error by implementing additional checks and balances within the manual process. No additional misstatements have been found and all internal controls off the financial reporting seem appropriate and just.

When testing of internal controls indicates that there may be significant deficiencies, then the auditor

Field Work Standard #2 : The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures (AICPA). Enron had no procedure for internal controls. Therefore, Anderson could not have sufficient understanding of the internal controls.

The final responsibility for the integrity of an SEC registrant’s internal controls lies on the management team. U.S. companies need to refer to a comprehensive framework of internal control when assessing the quality of financial reporting to determine that financial statements are being presented under General Accepted Accounting Principles, GAAP. The widely used framework is referred as COSO, Committee of Sponsoring Organizations of the Treadway Commission, sponsored by the following organizations American Accounting Association, the American Institute of CPA’s, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s defines internal control as:

Honicker Corporation is a USA based, successful dashboard manufacturer. It has opportunities for international expansion, but due to the ultraconservative culture it did not happened until they faced a change in management in 2009. Honicker was a rich company, and to expand, they took the short road and acquired four companies around the world: Alpha, Beta, Gamma, and Delta. There were two commonalities among these companies: they serviced mainly in their own geographical area, and senior management knew their geographical culture and hold good reputation with their stakeholders.

This paper critically analyses the independence of the internal audit function through its relationship with management and the audit committee. Given the growing role of internal auditing in contemporary corporate governance and independence has gained renewed attention.