1. First thing that is suspicious and worries me is not having any gain or loss. It is concerning the situation when you are not sure about what are the odds in knowing exactly the book value when you sold it. So, upon reviewing the gains and losses on disposals, you would be a bit alerted from an analytical procedures view. You would review the asset ledgers for large transactions and those near year end. You would inquire about what you did with the old registers when you noticed the new ones, like large purchase and when you saw that the purchaser was also the vendor who sold the new ones, you would be alerted.

2. A great method to find the violations is to look to the qualities and characteristics of financial reports. This exaggerated the price of the new registers so they were recorded at above fair value, which is a violation of GAAP. You are never allowed to record an asset above the fair value, this is not a faithful representation. Also, the transaction for the sale of the used registers was not a good faith arms-length transaction violated neutrality and reliability and therefore should have been examined for authenticity. That is, there were no real procedures for the used items and so the gain or loss was not properly calculated in accordance with GAAP. The transactions were also not faithfully disclosed because it was reported as a sale and purchase instead of a purchase and disposal of worthless used items. This was misleading to the reader and makes the financial statements less reliable and representational faithfulness is lost.

3. “Earnings management” techniques are the selection of accepted methods in order to look your best in front of creditors, investors, clients and government bodies. You can pick straight line depreciation or double declining balance and your reason might be to show better or worse profits to achieve a particular