Essay about Surfer Dude Duds, Inc

Our project team analyzed the Fraud and Illegal Acts Case (True blood Case Studies- Case 08-9), which involves a questionable sales transaction made between Jersey Johnnie’s Surfboard, an SEC registrant, and Mr. Sinaloa, an independent sales representative of the company. As a simplified overview of the case, an external audit firm was hired on to perform a year-end audit of Jersey Johnnie’s Surfboards, Inc. Towards the end of the audit, the engagement partner notified the auditors that there could be a possibility of fraud and illegal acts made by the company.

The auditor must remember that all information collected during the audit needs to be sufficient enough to further the audit process. The information must not only possess the two qualities, relevance and reliability, but it should also test various assertions. For instance, in the audit of Walmart, the auditor should make an attempt to acquire information such as financial statements from the company’s bank, as opposed to acquiring the statements from Walmart’s management. Taking such crucial information from Walmart’s management will put the reliability of that information into question. It is possible that management may manipulate the financial statements, so that they are more appealing to the public and investors. Management may do things

According to an article in the CPA Journal, the accounting profession has long contended that an audit conducted in accordance with generally accepted auditing standards (GAAS) provides reasonable assurance that there are no material misstatements contained within financial statements. Suggest at least two (2) alternative methods that auditors can use to provide a more concrete level of assurance to investors. Provide support for your responses with examples of such methods in use.

The auditor must review disclosures for adequacy, and if the auditor concludes that information disclosures are not reasonably adequate, the auditor must state so in the auditor’s

What are some situations that would require modification of the auditor’s opinion related to going concern?

The entity in question did not receive an opinion from the audit firm this is because they are provided with few procedures, which do not suffice to provide assurance about the statements. (Fischer, et, al, 2012)Although the audit firm is supposed to come up with opinions concerning the financial position of the county, the G.A.S.B provides limited procedures for the audit firm to manipulate. (Ruppel,

If the accounts and projections are not updated, then the financial statements will mislead the auditors, bank officials and the users of the financial information in their judgment of the company’s financial health. This practice is dishonest and contradicts the integrity principle per the Code of Conduct. The objectivity principle states that the professionals should not be prejudiced and should be free of conflicts of interest in discharging their duties diligently. The question here is whether there is any basis on which Bill and Dan may not make disclosures to the external auditors or anyone else. What can be the best procedure to comply with the relevant laws and regulations so as not to discredit the profession and the company? These dilemmas can be solved by involving the Directors and the audit

2 , when do you first see signs of GM’s impending financial distress? 2. In referencing professional standards, what factors should auditors consider in evaluating potential going- concern uncertainties?

a. The ambiguity Sarbanes §404 presents for corporate management and the relationship of external auditors. (In re Cardinal Health, Inc. Sec. Litigs., 2006)

The chief executive of the company was closely working with the vendors whose confirmations were vital in the auditing work and hence they could have submitted false confirmations. The auditing firm established a national risk management program for its clients and so national reviews were done to identify the high risk items in the financial statement. The vendor allowances were particularly high but they were not documented. As such, the auditors were supposed to demand for the documentations and compare them with the real figures. It is however noted that most of the documentations received were non-standard and this could have led to a different audit report given that vendor allowances were earlier identified as a high risk area. Inventory management was found to be poor especially in the allowances for inventory reserves. The audit firm was therefore obliged to carry out a thorough evaluation of the inventory reserves and determine whether it was reasonable. The valuation was also supposed to include all classes of inventory but for the case of the company, the evaluation excluded instances where no sales had been made. Hence, this evaluation could not accurately represent the position of the inventory reserve in the company. (Waters,2003)

Additional concerns have been made in regards to the red flags missed by auditors. First of all, auditors should have been alarmed by the size of the cash account held in the Cayman Islands. Auditors should have remained skeptical about the existence of this account. They should’ve addressed this red flag with

Under the Sarbanes-Oxley Act of 2002, reports on internal control are required. Did the company’s management acknowledge its responsibility for establishing and

Auditor’s opinion of a company and managements discussion is an indication of the company ability to continue as a going concern. According to Schroeder, Clark, &Cathey (2009), “review the management discussion and analysis section of the annual report and the auditor’s opinion to determine management’s opinion of the company’s future to identify any major accounting issues” (p. 158).

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

A company prepares financial statement to provide information about its financial position and performance. This information is in turn used by a wide range of stakeholders (such as investors, banks, customers, suppliers etc) in making economic decisions with respect to respective economic interest in the company. Typically, in terms of ownership by investment in shares of the company, shareholders though own the company but do not manage it. Therefore, the shareholder and other such stakeholders to get comfort in taking sound decision need independent assurance from the auditors that the financial statements reflect true and fair view of the company affairs in all material respects. Hence, in order to enhance the level of