Hanauer's Essay

551 Words3 Pages
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. Identify the audit objectives that Hanauer’s auditors hoped to accomplish as a result of their account confirmation procedures. In your response, consider each of the four types of account balances. 3. What additional alternative audit procedures do you believe the Hanauer auditors should have applied to those accounts that the client did not want confirmed? 4. Define a material audit scope limitation in general terms. Do you agree with the SEC that Hanauer’s management imposed a material scope limitation on its annual audits? 5. Should an audit client be allowed to “follow’ its engagement audit partner to another accounting firm? Facts J.B. Hanauer & Co. is a brokerage firm headquartered in New Jersey. During the late 1970’s and early 1980’s Stanley Goldberg supervised the annual audits of J.B. Hanauer & Co. During his career Goldberg served as an audit partner with three different public accounting firms. When he left Touche Ross to join Eisner, Hanauer’s executives wanted Goldberg to continue supervising their annual audits. As a result, in 1980 these executives dismissed Touche Ross and retained the Eisner firm. Despite several questions regarding the reliability of Hanauer’s internal controls, each year that Goldberg supervised the firm’s independent audit, he concluded that there were no material weaknesses in its internal control structure. One of his greatest concerns was the extensive and unusual degree of authority Hanauer granted to its sales staff. Some tasks performed by sales staff were: they accepted and processed customers purchased orders, personally delivered

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