Auditing Cases: An Interactive Learning Approach (Subscription)

This is the eBook of the printed book and may not include any media, website access codes, or print supplements that may come packaged with the bound book. Auditing Cases: An Interactive Learning Approach is intended for use in undergraduate and graduate Auditing, Professional Research Case, or capstone courses. Step through real auditing cases one by one in this comprehensive text Auditing Cases is a comprehensive case book that focuses on each of the major activities performed during an audit. Most of the auditing cases are based on actual companies, and a number address financial reporting fraud. The unique active learning approach helps students learn to think critically and develop their interpersonal skills, which are increasingly important in the workplace.   Teaching and Learning Experience To provide a better teaching and learning experience–for both instructors and students–this program will: Engage Students with an Active Learning Approach: The auditing cases capture students’ interest using lively narrative that introduces emerging accounting-related issues. Easily Integrate Cases into your Course: The Instructor’s Resource Manual offers instructional approaches, activity ideas, and group assignments to merge the cases into an existing course. Help Students See Concepts in Action: Cases are introduced according to the phase of auditing they demonstrate, presenting students with clear examples of the material.

Table of Contents:
Introduction: Professional Judgment   Section 1: Client Acceptance 1.1 Ocean Manufacturing, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The New Client Acceptance Decision   Section 2: Understanding the Client’s Business and Assessing Risk 2.1 Your1040Return.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Evaluating eBusiness Revenue Recognition, Information Privacy, and Electronic Evidence Issues 2.2 Apple Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Evaluation of Client Business Risk 2.3 Flash Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Risk Analysis 2.4 Asher Farms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Understanding of Client’s Business Environment   Section 3: Professional and Ethical Issues 3.1 A Day in the Life of Brent Dorsey . . . . . . . . . . . . . . . . . . . . . . . 57 Staff Auditor Professional Pressures 3.2 Nathan Johnson’s Rental Car Reimbursement . . . . . . . . . . . . . . . . 61 Should He Pocket the Cash? 3.3 The Anonymous Caller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Recognizing It’s a Fraud and Evaluating What to Do 3.4 WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 The Story of a Whistleblower 3.5 Hollinger International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Realities of Audit-Related Litigation   Section 4: Accounting Fraud and Auditor Legal Liability 4.1 Enron Corporation and Andersen, LLP . . . . . . . . . . . . . . . . . . . 87 Analyzing the Fall of Two Giants 4.2 Comptronix Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Identifying Inherent Risk and Control Risk Factors 4.3 Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Assessing the Control Environment and Evaluating Risk of Financial Statement Fraud 4.4 Waste Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Manipulating Accounting Estimates 4.5 Xerox Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Evaluating Risk of Financial Statement Fraud 4.6 Phar-Mor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Accounting Fraud, Litigation, and Auditor Liability 4.7 Satyam Computer Services Limited . . . . . . . . . . . . . . . . . . . . . 143 Controlling the Confirmation Process   Section 5: Internal Control over Financial Reporting 5.1 Simply Steam, Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 Evaluation of Internal Control Environment 5.2 Easy Clean, Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Evaluation of Internal Control Environment 5.3 Red Bluff Inn & Café . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Establishing Effective Internal Control in a Small Business 5.4 St. James Clothiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Evaluation of Manual and IT-Based Sales Accounting System Risks 5.5 Collins Harp Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Recommending IT Systems Development Controls 5.6 Sarbox Scooter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 5.7 Société Générale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 How a Low-Risk Trading Area Caused a $7.2 Billion Loss   Section 6: The Impact of Information Technology 6.1 Harley-Davidson, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Identifying eBusiness Risks and Related Assurance Services for the eBusiness Marketplace 6.2 Jacksonville Jaguars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Evaluating IT Benefits and Risks and Identifying Trust Services Opportunities   Section 7: Planning Materiality 7.1 Anne Aylor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Determination of Planning Materiality and Tolerable Misstatement   Section 8: Analytical Procedures 8.1 Laramie Wire Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . 233 Using Analytical Procedures in Audit Planning 8.2 Northwest Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Developing Expectations for Analytical Procedures 8.3 Burlingham Bees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Using Analytical Procedures as Substantive Tests   Section 9: Auditing Cash, Fair Value, and Revenues 9.1 Wally’s Billboard & Sign Supply . . . . . . . . . . . . . . . . . . . . . . . 249 The Audit of Cash 9.2 Henrico Retail, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Understanding the IT Accounting System and Identifying Audit Evidence for Retail Sales 9.3 Longeta Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 Auditing Revenue Contracts 9.4 Bud's Big Blue Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . 273 Accounts Receivable Confirmations 9.5 Morris Mining Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 285 Auditing Fair Value 9.6 Hooplah, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Applying Audit Sampling Concepts to Tests of Controls and Substantive Testing in the Revenue Cycle 9.7 RedPack Beer Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 Estimating the Allowance for Bad Debts   Section 10: Planning and Performing Audit Procedures in the Revenue and Expenditure Cycles: An Audit SImulation 10.1 Southeast Shoe Distributor, Inc. . . . . . . . . . . . . . . . . . . . . . . 311 Identification of Tests of Controls for the Revenue Cycle (Sales and Cash Receipts) 10.2 Southeast Shoe Distributor, Inc. . . . . . . . . . . . . . . . . . . . . . . 329 Identification of Substantive Tests for the Revenue Cycle (Sales and Cash Receipts) 10.3 Southeast Shoe Distributor, Inc. . . . . . . . . . . . . . . . . . . . . . . 339 Selection of Audit Tests and Risk Assessment for the Revenue Cycle (Sales and Cash Receipts) 10.4 Southeast Shoe Distributor, Inc. . . . . . . . . . . . . . . . . . . . . . . 347 Performance of Tests of Transactions for the Expenditure Cycle (Acquisitions and Cash Disbursements) 10.5 Southeast Shoe Distributor, Inc. . . . . . . . . . . . . . . . . . . . . . . 367 Performance of Tests of Balances for the Expenditure Cycle (Acquisitions and Cash Disbursements)   Section 11: Developing and Evaluating Audit Documentation 11.1 The Runners Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Litigation Support Review of Audit Documentation for Notes Payable   Section 12: Completing the Audit, Reporting to Management, and External Reporting 12.1 EyeMax Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395 Evaluation of Audit Differences 12.2 Auto Parts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 Considering Materiality When Evaluating Accounting Policies and Footnote Disclosures 12.3 K&K Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Leveraging Audit Findings to Provide Value-Added Insights in a Manufacturing Environment 12.4 Surfer Dude Duds, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409 Considering the Going-Concern Assumption 12.5 Murchison Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 413 Evaluating an Attorney’s Response and Identifying the Proper Audit Report 12.6 Going Green . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 Sustainability and External Reporting