Essay about Student Intro

23512 Words May 5th, 2012 95 Pages
Solutions for the Biltrite Bicycles Inc. Case

Module I - Assessment of Inherent Risk..............................................................3 Module II – PRELIMINARY ASSESSMENT OF CONTROL RISK BASED ON AN UNDERSTANDING OF THE DESIGN OF CONTROLS ................17 Module III - Control Testing: Sales Processing................................................29 Module IV - PPS Sampling: Factory Equipment Additions............................31 Module V - Accounts Receivable Aging Analysis..............................................35 Module VI - Sales and Purchases Cutoff Tests..................................................42 Module VII - Search for Unrecorded Liabilities...............................................47 Module
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• The corporate controller’s former affiliation with the accounting firm enables him to better assist the audit team in completing various tasks (but see weaknesses below). WEAKNESSES: • Although competent, the internal audit staff reports to the corporate controller. This impairs audit independence within the organization and places too much emphasis on financial auditing relative to operational auditing. • Having once been employed by the auditing firm, the corporate controller is familiar with the firm’s auditing strategies and procedures. This knowledge could assist in concealing fraud from the audit team. • Given a manufacturing facility of this magnitude, a separate “plant assets” section within the accounting function appears to be warranted. • No mention is made of a tax person or a tax department within the company. • Given the changes in the company, there should be some periodic review of the organizational chart to assess whether changes are needed (having the same organizational structure for over 30 years may not be the most effective or efficient) • There is a focus on centralized decision making with the CEO, Trevor Lawton, having a dominant role on decision making issues.

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BR-4

SOLUTIONS FOR THE BILTRITE CASES Figure BR.A: Biltrite Bicycles

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