You have just finished your yearly audit of a publicly traded corporation. Describe how you would handle each of the following scenarios:
Describe why there is a big emphasis placed on auditing cash and cash equivalents. Address the following:
- Why is this area more susceptible to fraud?
- How do the controls of traditional financial instruments differ from new types of marketable securities investments?
- What are some new risks that you should be concerned with?
- How is collateral figured out in these types of audits?
While doing an audit, you discover inconsistencies in the company’s expenses. Address the following:
- Why might a company choose to overstate or understate its expenses?
- How might this be accomplished?
- Describe how professional skepticism plays into this type of audit.
Why is auditing inventory more complex than auditing other asset accounts? Address the following:
- What controls are companies expected to have from the time goods are purchased to the time invoices are payed in accounts payable?
- What are the various tests that can be applied, and how do the internal controls play into it?
When an auditor is trying to determine if the financial statements are reported fairly, how might a summary of potential adjustments help? Address the following:
- What information would they give to the auditor?
- Would an analysis of the internal controls report be beneficial at this point?