Reference no: EM13763570

You have just finished your yearly audit of a publicly traded corporation. Describe how you would handle each of the following scenarios:

Scenario 1:

Describe why there is a big emphasis placed on auditing cash and cash equivalents. Address the following:

• Why is this area more susceptible to fraud?
• How do the controls of traditional financial instruments differ from new types of marketable securities investments?
• What are some new risks that you should be concerned with?
• How is collateral figured out in these types of audits?

Scenario 2:

While doing an audit, you discover inconsistencies in the company's expenses. Address the following:

• Why might a company choose to overstate or understate its expenses?
• How might this be accomplished?
• Describe how professional skepticism plays into this type of audit.

Scenario 3:

Why is auditing inventory more complex than auditing other asset accounts? Address the following:

• What controls are companies expected to have from the time goods are purchased to the time invoices are payed in accounts payable?
• What are the various tests that can be applied, and how do the internal controls play into it?

Scenario 4:

When an auditor is trying to determine if the financial statements are reported fairly, how might a summary of potential adjustments help? Address the following:

• What information would they give to the auditor?
• Would an analysis of the internal controls report be beneficial at this point?