Review Of Golden Bear Golf, Inc

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Further to your request we have prepared a report on the findings from the audit file of Golden Bear Golf, Inc (Golden Bear). We believe Golden Bear’s major issue for the 1997 audit is management integrity with in their wholly owned subsidiary, Paragon International (“Paragon”). This issue impacts both audit risk and inherent risk when determining the overall acceptable audit risk. A major concern is Paragon’s executive incentive compensation package as it includes the possibility to earn a sizable bonus if certain operating benchmarks are met. Additionally John Boyd, Paragon’s President and Principal Operating Officer has been granted a large number of Golden Bear stock options. This could lead to the intentional inflation of construction completion targets specifically in relation to construction revenues. 1997 Golden Bear Audit Risk Assessment One of the risks for the 1997 audit is revenue recognition. This is an important risk for the audit because Paragon is constructing many new facilities, and how they record/allocate revenues for contracts were been questioned and are not in line with industry standards. Paragon has recorded costs on construction projects that did not exist or were not yet at the percent of completion being charged to the customer, this led to the creation of fictitious revenues. Boyd and Curbello caused the material understatement of costs by knowingly ignoring cost estimates in order to 1. conceal losses resulting from its practice of

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