Reference no: EM131758338

Using the Computer to Discover Intentional Financial Misstatements in Transactions and Account Balances.

AMI International is a large office products company. Headquarters management imposed pressure on operating division managers to meet profit fore- casts. The division managers met these profit goals using several accounting manipulations involving the record-keeping system that maintained all transactions and account balances on computer files. Employees who operated the computer accounting system were aware of the modifications of policy the managers ordered to accomplish the financial statement manipulations. The management and employees carried out these activities:

1. Deferred inventory write-downs for obsolete and damaged goods.

2. Kept open the sales entry system after the quarterly and annual cutoff dates, recording sales of goods shipped after the cutoff dates.

3. Recorded as sales transactions that had been coded as leases of office equipment.

4. Recorded shipments to branch offices as sales.

5. Postponed recording vendors' invoices for parts and services until later, but the actual invoice date was faithfully entered according to accounting policy.

Required:

Describe one or more procedures that could be performed with CAATs to detect signs of each of these transaction manipulations. Limit your answer to the actual work accomplished by the computer software.