Crazy Eddie

835 Words4 Pages
Crazy Eddie


2 . If better, more complete audit procedures were performed, it is likely that many of the major accounting irregularities and fraudulent practices could have been uncovered. a) The falsification of inventory count sheets: The auditors could have conducted full physical inventory counts, or performed random inventory counts at warehouses or stores undisclosed to the management at Crazy Eddie prior to the tests. This would have prevented the management from strategically shipping inventory from locations that were going to be audited to those where the misstatements would not be detected. Additionally, they could have preformed or observed random cycle counts. The fact that they switched from the
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If auditors give in to pressure to charge insufficient prices for their auditing services in efforts to maintain an important client, the audit quality can be greatly impaired. If they are not receiving enough income, they will be unable to cover the costs of completing a thorough and complete audit, so the quality of the audit will be compromised.
5. If the personnel at our client were unable to locate requested invoice records, as a member of the audit team, I would have contacted the external parties to see if they had any copies of the invoices or any records pertaining to the transactions being investigated. I could also inquire as to whether or not the invoices are linked/related in any way to other documents, and if so, request to see those. Being that they were unable to locate a significant number of requested documents, I would observe their procedures for a transaction from the start to finish in order to identify possible reasons and opportunities for crucial documents to get lost and information and records to be compromised. Additionally, this would be an indicator that some of the clients’ internal controls were compromised, insufficient, or non-existent, so I would look into that as well until the controls were fixed and proper controls were in place.
6. Hiring individuals who served as independent auditors for the company in the past presents many opportunities for fraud, collusion, and inaccurate financial reporting within the

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