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Would accept the justification of chief financial officer

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Your team was assigned to conduct a financial audit of Apps.com, Inc. for the year ended 2019. The results of vertical and horizontal analyses of financial statements for the two-year periods ended 2018 and 2019 showed a significant decrease in notes payable. However, there was no payment of long-term debt reflected in the cash flow statement.

  • When asked by the audit team, the chief financial officer claimed that the subject debt was forgiven by the creditor-bank and even provided the condonation letter.

Problem 1: If you are the auditor, would you accept the justification of the chief financial officer that subject debt was already condoned? Why or why not?

Problem 2: What specific audit procedures/substantive tests you will perform to determine if fraud does exists? Give at least five.

Reference no: EM132817883

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