Auditing Cases An Interactive Learning Approach, Beasley - Downloadable Solutions Manual (Revised)

Auditing Cases
Instructor Resource Manual
SIX TH E D I TI O N
Mark S. Beasley
Frank A. Buckless
Steven M. Glover
Douglas F. Prawitt

DO NOT COPY OR REDISTRIBUTE


Boston · Columbus · Indianapolis · New York · San Francisco · Upper Saddle River
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, TA B L E O F CO N T E N T S
INTRODUCTION Professional Judgment . . . . . . . . . . . . . . . . 1


S E CT ION
1 Client Acceptance
C A S ES INC LU DE D IN T HIS SE CTION
1.1 Ocean Manufacturing, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
The New Client Acceptance Decision


S E CT ION
2 Understanding the Client’s Business
and Assessing Risk
C A S ES INC LU DE D IN T HIS SE CTION
2.1 Your1040Return.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Evaluating eBusiness Revenue Recognition, Information Privacy,
and Electronic Evidence Issues
2.2 Apple Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Evaluation of Client Business Risk
2.3 Flash Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Risk Analysis
2.4 Asher Farms Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Understanding of Client’s Business Environment


S E CT ION
3 Professional and Ethical Issues
C A S ES INC LU DE D IN T HIS SE CTION
3.1 A Day in the Life of Brent Dorsey . . . . . . . . . . . . . . . . . . . . . . . 67
Staff Auditor Professional Pressures
3.2 Nathan Johnson’s Rental Car Reimbursement . . . . . . . . . . . . . . . . 71
Should He Pocket the Cash?
3.3 The Anonymous Caller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Recognizing It’s a Fraud and Evaluating What to Do
3.4 WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
The Story of a Whistleblower
3.5 Hollinger International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Realities of Audit-Related Litigation
INSTRUCTOR RESOURCE MANUAL — DO NOT COPY OR REDISTRIBUTE Copyright © 2016 by Pearson Education, Inc.
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, TA B L E O F CONT E NT S
S E CTI ON
4 Accounting Fraud and Auditor Legal Liability
CAS ES INC L U DE D IN T H IS SE C T ION
4.1 Enron Corporation and Andersen, LLP . . . . . . . . . . . . . . . . . . . 103
Analyzing the Fall of Two Giants
4.2 Comptronix Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Identifying Inherent Risk and Control Risk Factors
4.3 Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Assessing the Control Environment and Evaluating Risk of
Financial Statement Fraud
4.4 Waste Management, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Manipulating Accounting Estimates
4.5 Xerox Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Evaluating Risk of Financial Statement Fraud
4.6 Phar-Mor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Accounting Fraud, Litigation, and Auditor Liability
4.7 Satyam Computer Services Limited . . . . . . . . . . . . . . . . . . . . . 175
Controlling the Confirmation Process


S E CTI ON
5 Internal Control over Financial Reporting
CAS ES INC L U DE D IN T H IS SE C T ION
5.1 Simply Steam, Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Evaluation of Internal Control Environment
5.2 Easy Clean, Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Evaluation of Internal Control Environment
5.3 Red Bluff Inn & Café . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Establishing Effective Internal Control in a Small Business
5.4 St. James Clothiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Evaluation of Manual and IT-Based Sales Accounting System Risks
5.5 Collins Harp Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Recommending IT Systems Development Controls
5.6 Sarbox Scooter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Scoping and Evaluation Judgments in the Audit of Internal
Control over Financial Reporting
5.7 Société Générale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
How a Low-Risk Trading Area Caused a $7.2 Billion Loss
Copyright © 2016 by Pearson Education, Inc. INSTRUCTOR RESOURCE MANUAL — DO NOT COPY OR REDISTRIBUTE
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