Just for Feet Audit Case 5-7

776 WordsApr 15, 20134 Pages
5) a) Evidence supporting USSC’s claim that the costs in question involved tooling modifications: * Collected invoices/purchase orders, obviously labelled accordingly * USSC executives’ explanations * Explanations of Mr. More and guided tour at Lacey Manufacturing Company b) Evidence supporting USSC’s claim that the costs in question involved generic production expenses: * Information provided by Mr. Yamont of Barden Corporation * Confusing nature of explanations provided by USSC executives * Changed opinion of Mr. More * Per unit pricing * Internal controls at Lacey shop floor, regarding charging working hours to production/tooling works * Analytical techniques: huge increase in USSC fixed assets…show more content…
Findings discovered on March 3rd 1982 during discussions with USSC executives should have been analysed more closely. Even though the results likely would have been similar with the case Lacey Manufacturing Company, it would have been good to aim at arranging similar visit also to other companies supplying “tooling services” and compare answers. Also, as in this case it appears USSC executives have information superiority against auditors, it would have been good to appoint external expert in field of manufacturing to provide his opinion, if “tooling services” really had been supplied. Even though the business is new, e.g. a general machine shop expert could have been contributed. Further analytical work also could have been done – even though based on P&L easy answers were not available (e.g. net sales/cost of goods sold had been rather stable and hence does not refer to huge capitalization of production costs). Also, it might have been good idea to consult USSC Board of Directors on corporate governance and internal controls, especially considering the situation of the company and obvious incentives to inflate earnings (need to raise capital to finance growth and development investments). This would have been especially important, if Hope had suspected fraud. Further, if Hope had suspected illegal acts, on our opinion Hope could have been more “flexible”, when it comes to confidentiality requirements of auditors. Then he would have been more open

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