Crazy Eddie, Inc

An “audit failure” is a situation in which a professional auditor fails to detect a material error in the financial statements of the company they are auditing. The audit failure in the situation of Rita Crundwell the failure was exacerbated by the fact that the auditors continually signed off on the misstated statements for years. Crundwell is responsible for many of the deficiencies mentioned, such as the missing funds and the incorrect invoices. However, she is not the sole person responsible for this fraud. The lack of internal control is to blame, and this cannot be placed on a single person. The government should have separated duties and used

Overall, there were three “red flags” E&Y was not aware of during the audit. First, they neglected the 500% net income increase from 1999-2001. This should have raised awareness because revenues only increased by 5% during that same period. Second, the internal auditors were denied access to some of the corporate ledgers. E&Y should have seen this as being one of the largest red flags. Third, the audit team failed to properly investigate employee complaints.

Brent should talk to John about his issues. John may not have been aware that payables are a low-risk area and he could change the amount tested from thirty to twenty causing a decrease in man-hours. But John is the only one with the authority to make this decision. If John is unwilling to help Brent with his issues and concerns, Brent could discuss this with the manager above John, but should not test less or “eat time”. If I was in this situation I would discuss it with John because I would know that it is not in my power to make those kinds of decisions, and making those unethical decisions would have more adverse effects for the company on the audit this year and years to come that if he finished the audit over hours.

The auditing firm Coopers & Lybrand was accused of failing to perform a proper GAAS audit. One strategy the auditors could have performed was to follow the trail of revenue vs expenses. The auditor should have notice large sums ($10 million) of revenue going into one particular expense (Suppliers/Inventory). Considering Phar-Mor filed that they lost money in fiscal year 1984 and 1985 and they never cleared

4. Additional testing may still be required even if the error is corrected by the client. Many other errors during the month of April could have occurred on the accounting clerk’s watch that the auditor needs to do further testing to be sure no material misstatements are present. Some of these testing could be seeing what other duties the accounting clerk had during that month. Checking the client’s internal control for the entire entity could also be necessary to ensure that controls are in place for training employees that may need to fill the roles of a peer.

Eddie Bauer yielded the lowest net income among its competitors like The Gap, A & F and Land’s End. It achieved similar gross profit margin but got a poor performance on overall net income at 1% because it suffered from high expenditure on SG&A in both retail and catalog operations which accounted for 37% of its total net sales. This is extraordinary high while compared with its main competitors like A & F, and the Gap whose SG&A amounted to 22% and 27% of their net sales respectively (Table 1). A & F and Eddie Bauer are similar in size,

Obtained, reviewed and analyzed records from SEC database on Eddie Antar, Sam E, Antar, Crazy Eddie

Secondly, although the audit might have been in its final stages, the fact that there had already been a sticking point between the auditors and CMD as to the validity and accounting procedures of the companies write-off’s of accounts receivable, once the audit team was made aware of the pending lawsuit of CMD by one of its clients for the exact same reason, they should have reconsidered their position on the evidence (suspension of judgment) and made sure to review that evidence before issuing an opinion.

[pic]s a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Central Corporation (TCC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TCC’s sustained profitability, so that they can be brought to the attention of the company’s board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting.

It is possible for an auditor to come to an improper conclusion because documents, like invoices, could be easily falsified if management originally handles them or if the auditor receives them from management, like in the case of ZZZZ Best and Minkow. The auditor must always confirm payments directly with the third party.

There are various procedures that could be taken in to account that would, if properly implemented, would have detected the frauds that occurred within the companies. There are many control risks that should have been taking regarding inventory along with preliminary audit strategies for the inventory and substantive test to be done that would have raised many flags during the typical audits as well as in depth ones.

The person performing the audit should have come across consignment documentation and as a result should have requested to see that inventory.

Reports had the stores pulling in an unheard of $400 a square foot, wall street began to take notice. In 1984, Crazy Eddie went public. Howard Saroto however, wasn’t buying it and believed that since the company was going straight up, it was going to end up at zero. Sarota had a unique inside into the Antar’s, he had known them since their school days in Brooklyn and know what made them tick.

In the early 1980’s electron industry exploded lead to increasing growth to Crazy Eddie by 1987 the company product sales were the following

Because of the economic boom that took place in 1980s and 1990s, consulting services became very large profit generators that benefited companies in great profit margins. These consultants helped companies make a lot of money, and gain more partners from the consulting field. Public accounting firms became greatly interested in increasing their revenue by providing consulting services for their clients. In the 1980s, auditing became a “commodity service” inside public accounting firms. The emphasis on hiring switched from hiring experienced, accounting professionals with extensive accounting backgrounds, to hiring those with a different “skillset” that could bring great revenues to the company. What happened was that the large public accounting firms provided both consulting services and auditing services