Illustrate what steps would you as an auditor take to assure

Assignment Help Business Economics

Reference no: EM1348836

The auditor, in order to mitigate their audit risk, is to presume that there is fraud in the reporting of revenues for a firm. Consider a company that manufactures high-tech fiber-optic gear. Assume that the Wall Street analysts believe the industry has good growth prospects. The audit client is predicting a 20% increase in sales and a 27% increase in profits for the year under audit. The auditor is planning the audit and knows the following:

a) 65% of all sales are made to just five customers.

b) There are three companies with very similar products. One has a moderately larger market share and the other has a significantly smaller market share.

c) There are indications that the economy is slowing down and it is expected that a slowdown would affect the market for high-tech products that the company sells.

Following the scientific method in this example, illustrate what steps would you as an auditor take to assure you have minimized the potential for audit risk (making a positive evaluation of the firm's financial status when it is in fact negative)? Provide the questions you would ask in order to determine the potential for fraud. Identify in your evaluation what questions you would ask in your process of determining the Hypothesis for your evaluation. Once you have determined the hypothesis, what actions would you take to test the hypothesis? Following your test what actions would you take if the hypothesis must be rejected given the outcome of the test?

Reference no: EM1348836

Questions Cloud

Compute the critical path for the network : Enumerate all paths and their duration through this network and Compute the critical path for the network and What is the minimum duration of the project?

Excess reserves in the financial system : Suppose there is $400 billion of currency in circulation in the economy outside the banking system, that depository institutions in the economy have $800 billion in checkable deposits,

Who had a very low acceptance of power and authority : What are the disadvantages of having an accommodative style of handling conflicts

Speech differences because of cultural backgrounds : Share an example of an experience that you had where the meaning of a word was misinterpreted by another person due to differences in cultural backgrounds. Also, discuss strategies that can be used to improve intercultural communications.

Illustrate what steps would you as an auditor take to assure : illustrate what steps would you as an auditor take to assure you have minimized the potential for audit risk making a positive evaluation of the firm's financial status when it is in fact negative.

Role of leadership in changing a problem corporate culture : Make sure the proficient implementation of strategy in an organization, top-level executives can best achieve this by delegating authority to middle and lower-level managers and by creating a sense of empowerment among employees.

Writing function that computes leap years : Write down function that computes leap years. Function prototype is as follows: Write function body which returns true if year is a leap year and false if year is not a leap year.

Comment on the risk exposure and the risk-return profile : Consider a newly-listed company of interest to you and using the 2009 or 2010 annual accounting reports explain its business and financial environment.

Describe the lp process to phil and bert : Describe the LP process to Phil and Bert and What is LP and How is an LP problem defined and Write out the objective function.

User Account

All Pages