...T.1.SAS No. 106 “Audit Evidence’, identifies the principal “managementassertions” that underlie a set of financial statements. The occurrenceassertion was particularly critical for ZZZZ Best’s insurance restorationcontracts. ZZZZ Best’s auditors obtained third-party confirmations tosupport the contracts, reviewed available documentation, performedanalytical procedures to evaluate the reasonableness of the revenuesrecorded on the contracts, and visited selected restoration sites.Comment on the limitations of the evidence that these proceduresprovide with regard to the management assertion of occurrence. Upon the performance of those procedures, the auditors of ZZZZBest Inc. had obtained evidence in order to draw reasonableconclusions on which to base the audit opinion. However, theseevidences are subject to limitations due to factors not controlled by theauditors. First limitation of the evidence is its insufficiency to supportthe occurrence, reliability and relevance of events and transactions.Mere paperwork is not enough to prove an event to have existed. Italso needs inquiries from people accountable in recording orrecognizing such events. Moreover, there’s a risk in being dependenton evidences provided by the management itself. Auditors should askcooperation from the third parties in order to verify all records. Secondlimitation is the rules implemented by the client which prohibit auditorsto further inspect or review the financial standing of the company.Some clients...
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...This written assignment will present and discuss management events that occurred that should have been a red flag to the auditing firm and other subsequent events that have taken place. I will use different resources in order to discuss opinions and facts of the accounting profession related to presented scenarios. The auditing firm has been associated with the company throughout the period of time when the fraud was being committed. One of the common and clear indicators of the possible fraud was the company’s cash flow statement. The company experienced positive growth in their profits from 1996 through 1998. However, a close analysis of the cash flow statement shows that the company had experienced negative cash flow from both operating and investing activities and positive cash flow from financing activities which would not sufficiently offset the negative cash flow from operating and investing. It is evident that the company did not have sufficient liquidity to meet its daily operations but still was able to make a profit. This could have been one of the concerns to the auditing firm. In addition, the management had maintained a very unfamiliar accounting method with regard to store opening costs that the company accumulated to asset accounts that were amortized over twelve month period. The management’s deliberate violation of GAAP and the negative figures for the company cash flow could have been a clear warning and as such was not expected to record profits as it happened...
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...Case Study of Just For Feet Inc. Xuan Zhang Q1. Prepare common-sized balance sheets and income statements and compute key ratios for 1997-1998. What were the high-risk financial statement items for the 1998 audit? * Common-sized financial statements: * Key ratio analysis: Liquidity and solvency: | 1999 | 1998 | 1997 | Current ratio | 3.387 | 1.998 | 2.142 | Debt to equity | 1.117 | 0.672 | 0.720 | Times interest earned | 6.376 | 24.665 | 28.286 | Activity | | | | AR turnover | 44.641 | 42.749 | 39.127 | Inventory turnover | 1.493 | 1.649 | 1.107 | Profitability ratios | | | | Operating margin | 6.61% | 7.17% | 8.12% | Net margin | 3.44% | 4.47% | 5.43% | Return on assets | 3.87% | 4.77% | 3.70% | Return on equity | 8.18% | 7.98% | 6.37% | According to the data computed above, Just For Feet did relatively well in liquidity since the current ratio and debt to equity were similar to companies in the same industry. Besides, JFF had a typical AR turnover rate as others in the retail businesses, and the operating margin and net margin also looked fine. But turn to inventory turnover rate, the number was quite terrible for a retail company. Compare to average number of the industry which is around 2.8-3.2, JFF’s faced a serious difficulty on inventory turnover, which led to a potential risk in generating profit. Also the return on assets and equity were below the competitors in the market, and the time interest earned declined...
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...Systems analysis – the process of understanding and specifying in detail what the information system should do Systems design – the process of specifying in detail how the many component parts of the information system should be physically implemented Systems analyst – a business professional who uses analysis and design techniques to solve business problems using information technology Supers system a larger system that contains other system Functional decomposition – dividing a system into components based on subsystems that in turn are further divided into subsystem System boundary – the separation between a system and its environment that inputs and outputs must cross Automation boundary – the separation between the automated part of a system and the manual part of a system Transaction processing system – information systems that capture and record information about the transactions that affect the organization Management information system – information system that takes information captured by transaction processing systems and produces reports that management needs for planning and control Executive support system – support system that allow a user to explore the impact of available options or decisions Communication support system – supports systems that allow employees to communicate with each other and with customers and suppliers. Office support systems - support that help employees create and share documents including reports proposals, and memos Tools – software products...
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...Acct 6355 Ruiyi Feng Auditing Standard No. 11 | Consideration of Materiality in Planning and Performing an AuditThe fact is material if there is "a substantial likelihood that the …fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available."To obtain reasonable assurance about whether the financial statements are free of material misstatement, the auditor should plan and perform audit procedures to detect misstatements.To plan the nature, timing, and extent of audit procedures, the auditor should establish a materiality level for the financial statements as a whole and materiality levels for particular accounts or disclosures.The auditor should determine the amount of tolerable misstatement for purposes of assessing risks of material misstatement and planning and performing audit procedures at the account or disclosure level.For multiple locations or business units, the auditor should determine tolerable misstatement for the individual locations or business units at an amount that reduces to an appropriately low level the probability that the total of uncorrected and undetected misstatements would result in material misstatement of the consolidated financial statements.The auditor should reevaluate the established materiality level and tolerable misstatement when, because of changes in the particular circumstances or additional information that comes to the auditor's attention.If the auditor's reevaluation...
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...Just for Feet, Inc. Abstract Just for Feet, Inc. (JFF), its executive vice president; Don-Allen Ruttenberg, and the company’s auditing firm; Deloitte & Touche, LLP, and its associates; Steven H. Barry, CPA and Karen T. Baker, CPA, were all found guilty, on some level, in the fraud of Just for Feet, Inc. Ruttenberg purposely gave the company’s accounting department false financial information causing the accountants to record over $5 million in fictitious accounts receivable. This, in turn, caused the income statement to be overstated by $5 million (Knapp, M., 2009). The company’s auditors Deloitte, Barry, and Baker included the false information in JFF’s 1998 financial reports. These false reports were prepared for public filing with the Securities and Exchange Commission, which resulted in shareholders of JFF to be defrauded. Ruttenberg, Deloitte, Barry, and Baker were brought to justice, and the company’s shareholders settled for $32.4 million in a class-action lawsuit (Knapp, M., 2009). Just for Feet Based in Birmingham, Alabama, Just for Feet (JFF) was established in 1977 and became a publicly traded company in 1994. Despite a period of slow growth in the retail industry, JFF expanded rapidly from 1994 to 1999. By 1998, the company’s exceptional revenue growth deemed it as the top-selling retailer of athletic shoes and apparel in the United States. In JFF’s 1998 financial statements, the company reported $689.4 million in assets, $774.9 million...
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...Just for Feet 1) High risk financial statement items for Just for feet are the outrageous increase in debt from 1998 to 1999. The disappearance in property and equipment from 1998 to 1999. Also the large decrease in inventory from 1997 to 1998 would need to be looked into. The doubling in accounts payable is also something that would need to be examined 2) Some of internal audit risks are that management was obsessive over earnings and doing anything to meet earnings expectations. Also some other problems are that management aggressively interprets accounting standards. Management also accepts high levels of risk. These all provide an environment in which employees will do what is necessary to meet expectations even if it means fudging the accounting. 3) Some inherent risks in the industry and subindustry is that the retail athletic shoe market would be a lack of customer base to support all of the different competitors. Also in an area like Alabama where the market may be saturated with competition, and there will not be enough excess cash to spent on shoes. Also some other risks are the shoe stores in the malls. Also in order to get ahead of all the competition, a company may have unrealistic growth goals and may be taking on too much debt in order to attempt to grow ahead of competitors. You would want to ensure that the client is actually making the sales and that the receivables they are claiming do actually exist. 4) 1) There operating cash flows...
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... Just for FEET, Inc. | Balance Sheet | Years ending Jan 31st | 1996 | 1997 | 1998 | Current Assets: | Cash & Equivalents | 36.93% | 18.40% | 1.80% | Marketable Securities AFS | 9.04% | 0.00% | 0.00% | Accounts Receivable | 1.74% | 3.53% | 2.74% | Inventory | 35.47% | 45.97% | 58.01% | Other Current Assets | 0.56% | 1.50% | 2.65% | Total Current Assets | 83.75% | 69.40% | 65.20% | Property & Equipment, net | 14.61% | 21.08% | 23.29% | Goodwill, net | 0.00% | 8.05% | 10.31% | Other | 1.64% | 1.46% | 1.19% | Total Assets | 100.00% | 100.00% | 100.00% | Current Liabilities: | Short-Term Borrowings | 26.61% | 20.22% | 0.00% | Accounts Payable | 10.35% | 11.41% | 14.55% | Accrued Expenses | 1.46% | 2.07% | 3.60% | Income Taxes Payable | 0.11% | 0.30% | 0.13% | Current Maturities of LT Debt | 0.56% | 0.72% | 0.96% | Total Current Liabilities | 39.09% | 34.73% | 19.25% | LT Debt & Obligations | 2.76% | 5.48% | 33.51% | Total Liabilities | 41.85% | 40.21% | 52.75% | Shareholders' Equity: | Paid-In Capital | 50.69% | 48.76% | 36.20% | Retained Earnings | 7.47% | 11.03% | 11.04% | Total Shareholders' Equity | 58.15% | 59.79% | 47.25% | Total Liabilities & Equity | 100.00% | 100.00% | 100.00% | Case 1.3 Just for FEET, Inc. | Income Statement...
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...Synopsis 1.) Just for Feet | Common Size Balance Sheet | | 1996 | 1997 | 1998 | Current assets: | | | | Cash and cash equivalents | 36.93% | 18.40% | 1.80% | Marketable securities | | | | available for sale | 9.04% | 0.00% | 0.00% | Accounts receivable | 1.74% | 3.53% | 2.74% | Inventory | 35.47% | 45.97% | 58.01% | Other current assets | 0.56% | 1.50% | 2.65% | Total current assets | 83.75% | 69.40% | 65.20% | | | | | Property and equipment, net | 14.61% | 21.08% | 23.29% | Goodwill, net | 0.00% | 8.05% | 10.31% | Other | 1.64% | 1.46% | 1.19% | Total assets | 100.00% | 100.00% | 100.00% | | | | | Current Liabilities: | | | | Short term borrowings | 26.61% | 20.22% | 0.00% | Accounts payable | 10.35% | 11.41% | 14.55% | Accrued expenses | 1.46% | 2.07% | 3.60% | Income taxes payable | 0.11% | 0.30% | 0.13% | Current maturities of | | | | long term debt | 0.56% | 0.72% | 0.96% | Total current liabilities | 39.09% | 34.73% | 19.25% | | | | | Long term debt and obligations | 2.76% | 5.48% | 33.51% | Total liabilities | 41.85% | 40.21% | 52.75% | | | | | Shareholders' equity: | | | | Common stock | 0.00% | 0.00% | 0.00% | Paid-in capital | 50.69% | 48.76% | 36.20% | Retained earnings | 7.47% | 11.03% | 11.04% | Total shareholders' equity | 58.15% | 59.79% | 47.25% | | | | | Total liabilities and | | | | shareholders' equity | 100.00%...
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...Just for Feet, Case Study 1. Balance Sheets Just for FEET, Inc. | Balance Sheet | Years ending Jan 31st | | | | Current Assets: 1996 1997 1998 | Cash & Equivalents | 36.93% | 18.40% | 1.80% | Marketable Securities AFS | 9.04% | 0.00% | 0.00% | Accounts Receivable | 1.74% | 3.53% | 2.74% | Inventory | 35.47% | 45.97% | 58.01% | Other Current Assets | 0.56% | 1.50% | 2.65% | Total Current Assets | 83.75% | 69.40% | 65.20% | Property & Equipment, net | 14.61% | 21.08% | 23.29% | Goodwill, net | 0.00% | 8.05% | 10.31% | Other | 1.64% | 1.46% | 1.19% | Total Assets | 100.00% | 100.00% | 100.00% | Current Liabilities: | Short-Term Borrowings | 26.61% | 20.22% | 0.00% | Accounts Payable | 10.35% | 11.41% | 14.55% | Accrued Expenses | 1.46% | 2.07% | 3.60% | Income Taxes Payable | 0.11% | 0.30% | 0.13% | Current Maturities of LT Debt | 0.56% | 0.72% | 0.96% | Total Current Liabilities | 39.09% | 34.73% | 19.25% | LT Debt & Obligations | 2.76% | 5.48% | 33.51% | Total Liabilities | 41.85% | 40.21% | 52.75% | Shareholders' Equity: | Common Stock | 0.00% | 0.00% | 0.00% | Paid-In Capital | 50.69% | 48.76% | 36.20% | Retained Earnings | 7.47% | 11.03% | 11.04% | Total Shareholders' Equity | 58.15% | 59.79% | 47.25% | Total Liabilities & SH' Equity | 100.00% |...
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...Tiffany Hale AC503-02 Unit 3 Project 1. JUST FOR FEET, Inc. Income Statement Years ended January 31st | |1996 |1997 |1998 | |Net sales |100% |100% |100% | |Cost of sales |57.54% |58.46% |58.38% | |Gross Profit |46.24% |41.54% |41.62% | |Other revenues |0.23% |0.23% |0.17% | |Operating expenses: | | | | | Store operations |27.04% |29.18% |30.01% | | Store opening costs |4.38% |1.41% |1.76% | | Amortization of Intangibles |0.07% |0.25% |0.27% | | General & Administrative Expenses |3.07% |3.77% |3.14% | | Total Operating Expenses |34.57% |34.60% |35.18% | |Operating income ...
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...Ten Years in Just 89 Square Feet Jay Shafer and the Tiny House Movement by Antony Taylor For ten years, Jay woke up every morning to his bedroom ceiling, just 3' away from his face. After climbing down from his loft bed into his 6' x 6 ½' living room, he would enter his 4' x 2' bathroom. To most people, Jay would appear to be a prisoner, and the conditions might appear inhumane, yet Jay is not a prisoner, nor has he been forced into these living conditions. In fact, Jay not only chose to live in such a small space, he designed it himself! Jay's house for ten years, the “Epu” is the size of a walk-in closet in most of today's homes, yet it contains a living room, desk, fully functioning kitchen, separate bathroom, and loft bed space. Jay Shafer is the owner of the Tiny Tumbleweed House Company, founder of the Small House Society, an ecological activist, a new-era architect, and a lifestyle revolutionary. His minimalist lifestyle design has been featured in The New York Times, The San Francisco Chronicle, The Wall Street Journal, and Time Magazine. He and his tiny house has been featured on “CNN”, “Oprah”, “This Old House” and countless local news stations. Around the country, people are purchasing his designs, attending his workshops, and following his revolutionary example of how to live life with less space and less possessions, resulting in less of a drain on resources and the environment. A Mixture of Motivations Today's economy suffers in part due...
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...and 1600 the Spanish nautical league was equal to four Roman miles of 4 842 feet, making it 19 368 feet (5 903 meters or 3.1876 modern nautical miles). That seems pretty straight forward until one realizes that the accepted number of Spanish nautical leagues to a degree varied between 14 1/6 to 16 2/3 so in actual practice the length of a Spanish nautical league was 25 733 feet (7 843 meters or 4.235 modern nautical miles) to 21 874 feet (6 667 meters or 3.600 modern nautical miles) respectively.[8] Legua de por grado (league of the degree): From the 15th century through the early 17th century, the Spanish league of the degree was based on four Arabic miles. Although most contemporary accounts used an Arabic mile of 6 444 feet (1 964 meters), which gave a Spanish league of the degree of 25 776 feet (7 857 meters or 4.242 modern nautical miles) others defined an Arabic mile as just 6 000 feet making a Spanish league of the degree 24 000 feet (or 7315 meters, almost exactly 3.950 modern nautical miles).[9] Legua geographica (geographical league): Starting around 1630 the Spanish geographical league was used as the official nautical measurement and continued so through the 1840s. Its use on Spanish charts did not become mandatory until 1718. It was four millias (miles) in length. From 1630 to 1718 a millia was 5 564 feet (1696 meters), making a geographical league of four millias to be 22 256 feet (6784 m or 3.663 modern nautical miles). But from 1718...
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...Jasmine Zamora Professor Kristen Hassett EPSY 3360 December 1, 2014 Happy Feet Happy Feet is a movie that takes place in Antarctica amongst Empire penguins. The main character Mumble was just an egg when he is introduced. As his mother leaves the community to find food, Mumble father drops him; it is known that an egg must never be dropped because of the frigid temperature. Although it was unlikely for Mumble to hatch after the drop, he hatches and is livid with his feet. Mumble, in good spirits displays his unconventional talent. Not only was Mumble born with “happy feet” he was also born with the inability to sing. In order for penguins to mate, they must be able to serenade a female penguin. Without this important trait Mumble’s parents as well as the community are left in confusion. Possible causes of disabilities in children similar to Mumble would involve teratogens. “Teratogens are drugs, chemicals, or even infections that can cause abnormal fetal development. There are billions of potential teratogens but only a few agents are proven to have teratogenic effects,” (Pregnancy and Teratogens). Anything caused by an external force would be similar to the cause Mumble’s development. Teratogens can cause learning disabilities such as dyslexia and ADHD. Although it is not too obvious Mumble’s appearance is also different, he has a fluffy outer coat unlike his peers, and has blue eyes, and is smaller in size than the rest of his peers. Mumble’s development is similar...
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...JUST FOR FEET, INC. CASE STUDY QUESTIONS 1) Prepare common-sized balance sheets and income statements for Just for Feet for the period 1996-1998. Also, compute key liquidity, solvency, activity, and profitability ratios for 1997-1998. Given these data, comment on what you believe were the high-risk financial statement items for the 1998 Just for Feet audit. 2) Just for Feet operated large, high-volume retail stores. Identify internal control risks common to such businesses. How should these risks affect the audit planning decisions for such a client? Some internal controls risks common to high-volume retail stores would be theft of inventory, inventory accounting methods, false accounts receivable confirmations, separation of duties, authorization controls, information processing controls, physical controls. These risks should affect audit planning by focusing tests of these controls including: checking for safekeeping of documents, making sure there is a proper segregation of duties to avoid theft and misstatements, ensuring all transactions are authorized by management, looking closely at A/R confirmations, and the inventory accounting methods used. 3) Just for feet operated in an extremely competitive industry, or sub industry. Identify inherent risk factors common to businesses facing such completive conditions. How should these risks affect the audit planning decisions for such a client? Inherent risks for extremely competitive industries would...
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