The existence assertion is to make sure that the client and accounts exist, the completeness is to make sure that all of the balances are recorded, and the valuation is to make sure that the balances are recorded at the correct amount. It is important that the auditor obtains a confirmation from a third party for the information in accounts receivables. After communicating and obtaining the information, the auditor is to evaluate the information (SAS No. 67, AU Section 330.11). The audit objectives auditors use to perform year-end sales cutoff tests are to determine if the information they obtained by the confirmation reduces the audit risk level.
When the newly appointed audit partner at DTR, Will Borden, upon reviewing the audit of North Face Inc.’s 1997 financial statements, questioned why the adjustment shown and required by the work papers had not been adjusted in the financial statements, Fiedelman realized his error. Rather than correcting the error, he wanted to cover his tracks and found a way to cover up the error by altering the audit documentation without appropriate rationale, explanation or justification. The original 1997 audit papers therefore were replaced by
The company is required to file the auditor's attestation report as part of the annual report”. 2. Ernst & Ernst argued that the mail rule was not relevant to its audits of First Securities since that rule only involved personal transactions on Nay and the escrow investors. Do you agree? Why or why not?
I will come back to this in chapter 4.2 when I examine the influence of narcissism on the trade-off between disclosure and earnings management. Narcissism and overconfi-dence are positively correlated.33 In addition to overconfident people who just overes-timate their ability to predict the future which results in too much risk-taking, narcis-sists often also act opportunistically, they expect lots of attention34 and favour short-term rewards35. The relation between narcissism and self-esteem is harder to deter-mine. What has been shown is that narcissists’ self-esteem is more volatile, i.e. it de-creases or increases more than it does for less narcissistic people after failure or suc-cess.36 But narcissism and self-esteem are not clearly positively or negatively related as there are two forms of narcissism – vulnerable and grandiose.
Vandivier realized irregularities on data, the calibrations were manipulated, he has two choices , to manipulate the data or defy his boss. Q3 : How did Sink and Warren looked at the matter? How would you evaluate their conduct? They weren’t faithfull at all, they just wanted to done with project without
INTRODUCTION He didn’t coin the term “lemons,” but whenever consumers get stuck with one - whether it’s a used car, a faulty appliance or a less-than-adequate health care insurance policy - George Akerlof’s prize-winning theory comes alive. When some parties to business transactions may have an information advantage over others, the economy is said to be characterized by information asymmetry. Information asymmetry causes markets to become inefficient, since all the market participants do not have access to the information they need for their decision making processes. There are two types of information asymmetry. The first is adverse selection.
Hammersmith Tools Limited The underlying accounting policies have been applied in the preparation of the financial statements of Hammersmith Tools Ltd. Statement of Accounting Policies For the Year ending 31 December 2011 1. Purpose The purpose of the following statement of Accounting policies is to act as a guide to non-accounting employees on basic accounting procedures that are employed in the company while determining the overall profits of the company. 2. Basis of Preparation The financial statements are prepared in accordance with the applicable law and under the convention of Historical cost.
Issues 1. Identify internal control risks generally faced by a brokerage firm. Identify specific control risks posed by Hanauer’s operations. Did Hanauer’s auditors properly investigate these risks and take them into consideration when planning their year-end tests? 2.
Managerial Accountants should calculate net income or loss in a manner that accurately reflects the closest true costs and profits as determined by the International Federation of Accountants (IFA). To effectively help Management Accountants do this, the IFA has set in place a code of conduct that should regulate the integrity, competence, confidentiality, and credibility of a corporation. Introduction To fully understand the ethical issues of Managerial Accounting, you must first assess the difference between Managerial Accounting and Financial Accounting. Financial accounting is used for to present the status of the company to external sources such as board of directors, investors, auditors, and for reporting purposes as well. The financial side of accounting is used to represent the company’s current standing based on the past profits, net income, bad debts, and current ratio of assets to liabilities.
Top executives of companies are hired to improve performance and the pressure to do so can lead them to take unethical action to ensure their success. Publicly traded companies are consistently pressured by internal and external stakeholders to perform at higher level. When organizations are about to release financial reports that would possibly lead to a financial loss to the shareholders, the pressure to perform unethical accounting practices will increase. There is an opportunity to adjust the numbers so the financial reports will represent a more desirable outcome. Employees have the same opportunity to perform unethical accounting activities as the top executives.