...Describe your company, its location, and the product it makes or the service it provides. The North Face started in a small mountaineering retail shop in San Francisco’s North Beach by two hiker enthusiasts in 1968. Soon thereafter, The North Face moved to the other side of San Francisco to began designing and manufacturing its own brand of technical mountaineering apparel and equipment (Parker, Battles, Melechiori, Kim, Cummins, 2015). By the early 1980s, The North Face was taking exploration to the outer limits of the ski world, adding extreme skiwear to the product offering. By the end of the decade, The North Face became the only supplier in the United States to offer a comprehensive collection of high-performance outerwear, skiwear, sleeping bags, packs and tents (Johnson, 2015). Now, 48 years after its origin in the outdoor industry, The North Face provides an extensive line of performance apparel, equipment and footwear. Offering the most technically advanced products on the market, The North Face is the choice of the world’s most accomplished climbers, mountaineers, extreme skiers, snowboarders and explorers. The North Face is committed to pushing the limits of design; so that you can push your limits outdoors never stop exploring (Johnson, 2015). Develop an environmental analysis that includes competitive, technology and socio/cultural forces. Competition The North Face is known for their outdoor apparel and outdoor equipment. But in recent years other companies are...
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...THE NORTH FACE The North Face is an American outdoor clothing and goods brand formed in west coast San Francisco, 1968, by two hiking aficionados Douglas Tompkins and Kenneth Klopp. The given name references the notion that the north face of a mountain in the northern hemisphere is, by and large, the most difficult to scale. The company specializes in outerwear, footwear and equipment such as backpacks, tents and sleeping bags targeting climbing enthusiasts bound for The Himalayas. However, in the late 90s and early 00s with the emergence of 'wilderness chic' it became all the rage though for most of their fans driving a Range Rover to the ParknShop would be the most strenuous expedition undertaken. Spearheaded by like brands Timberland and UGG, it's audience has widen significantly in the last decade. The North Face's logo was designed by David Alcorn in 1971 and consists of a somewhat skewed quarter-circle with two lines threading within it. This logo is an illustration of Half Dome, a gigantic granitic monolith in Yosemite National Park. As an extra, The North Face is presently a subsidiary of the VF Corporation which is headquartered in Stabio, Switzerland. Other subsidiaries administered by said corporation include Timberland, 7 for all mankind, Wrangler and Vans. The North Face's logo has turned into such a ubiquitous sight on anybody shielding themselves from the cold that it is no real surprise that the brand utterly dominates the outdoor market by quite some way...
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...http://www.academia.edu/9339215/CASE_STUDY_OF_THE_NORTH_FACE_INC._AUDITING_ Summary Founded in the mid-1960's by Hap Klopp, The North Face, Inc., was a premier supplier of high-quality hiking, camping, and outdoor gear. In July 1996, North Face's went public. Initially, it sold at $14 per share, then peaked at $30 per share. In March 1999, NASDAQ halted public trading of North Face stock following the company's announcement it would be restating financial statements due to "bad bookkeeping".Christopher Crawford (CFO) boosted company sales by negotiating a barter transaction structured to avoid triggering materiality levels. Result: In May 2000, VF Corporation bought North Face for $2 per share. (Knapp, 2013) Question1 Should auditors insist that their clients accept all proposed audit adjustments, even those that have an "immaterial" effect on the given financial statements? Defend your answer. AnswerforQuestion1: • Auditors should not insist that clients accept all proposed audit adjustments. • Auditors are not perfect and clients should therefore have the right to reject proposed audit adjustments. • If a client does not accept a proposed audit adjustment, the auditor should generally be more suspicious as to the possibility of fraud and misstatement. Question2 Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors...
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...North Face Case Discussion The North Face, Inc. tried to position its outdoor apparel and sporting equipment products at the “high-end” segment of the retail market. In order to maintain the quality of its merchandise, North Face manufacturing all of its products in-house rather than out-sourcing some of its manufacturing operations to third parties. As a result of North Face’s limited production capacity, the company faced quality control issues over the next several years making it difficult to maintain its image as the leading producer of high-quality outdoor apparel. The company went public in 1996 and was accused of violating the revenue recognition principle when preparing its financial statements. Management had inflated revenue in order to meet expectations. Basically, North Face was incorrectly recognizing revenue barter transactions. North Face’s CFO, Crawford, was a CPA and knew that if he kept these transactions under the materiality threshold, then the auditors would not look into the matter. Additionally, North Face arranged two large sales to inflate the company’s revenue; however, the two transactions were actually consignments rather than sales. North Face’s auditors, Deloitte & Touche, knew that they should reverse the barter transaction, but then changed their minds because it was immaterial. As a result, the advisory partner for the North Face audit engagement, Richard Fiedelman...
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...target market for North Face is individuals between the ages of 36-51. 40% of the market lies in ages 25-50. However, 5% of sales lies in ages 50-75 (Target Audience Analysis, 2017). According to market research for gender demographics sales are split down the middle for both 50% from male and female consumers. The demographics also vary outside of this age due to the large range of people owning pets. The pet hair resistant fleece targets anyone who owns pets and who understands the struggle of pets shedding and hair taking over clothing. North Face strives to be a very sustainable brand that works to use recycled industrial waste products by improving their technologies while reducing waste. They remain loyal to this practice...
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...North Face, Inc. 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an "immaterial" effect on the given financial statements? Define your answer. I think auditors should strongly insist that their proposed adjustments should be made. If the company makes the proposed adjustments, it would seem to allow for a lesser probability for misstatements to occur. Even though an adjustment may seem immaterial for one year's statements, a combination of these immaterialities over a 2-3 years timeframe could easily add up to be important, if not detrimental to the company's existence. In this case, luckily, North Face was able to recover from the fraudulent activity. 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual engagements? Would if be feasible for auditors to conceal this information from their audit clients? I do not think that withholding the materiality thresholds is necessary nor is it feasible. In most cases, I think the thresholds are based on the client's industry standards and a percentage of a base number for the client, i.e. gross profit, revenues, net income, etc. Trying to conceal that information would be waste of time that could be better spent investigating the sources of the immateriality. I think that any item that comes within 25% of the threshold should warrant further analysis. 4. Identify and...
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...1. As an auditor, your job is to examine companies’ financial statements and make sure the information correctly reflects the economic events that occurred during the accounting period. When a mistake is found the auditor determines if the misstatement is material or immaterial. Misstatements are material when they affect a person’s decision using the financial statements and are immaterial if there is no effect on a person’s decision. When an auditor comes across a misstatement of the financial statements that is considered immaterial, they should recognize it and suggest that management fix it. Since it is immaterial, the auditor shouldn’t insist if management decides not to take the auditors suggestion because after all it is immaterial and will not affect anyone’s decision based on the financial statements. 2. With unethical people out there in the world, like in this case Crawford, auditors should try not to let their clients be aware of the materiality thresholds that are set and used for the audit. If management or other employees find out this information, they can use it to manipulate the records, accounts, or the system since they have an idea of what is being looked for. Now, is it feasible for an auditor to conceal this information? I believe it is almost impossible for this information to be held from the client. During an audit, often times the auditors will get assistances from the client’s employees to help with the cost. Auditors will usually...
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...that “The account balance is misstated, but the client disagrees. The auditor will issue an audit report indicating that the financial statements, in his or her opinion, are not fairly presented.” Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagement? Would it be feasible for auditors to conceal this information from their audit clients. ? It would be feasible for auditors to conceal this information from their audit clients. In the North Face case, Crawford, The North Face’s CFO, knew the materiality threshold that Deloitte had established for them, and also knew that the gross profit of approximately $800,000 on the $1.64million fell slightly below Deloitte’s materiality threshold for North Face’s collective gross profit. He believed that company would pass on that proposed adjustment. If CFO of North Face didn’t know the threshold, it would be another story. Anyway, general acceptable accounting principle and other accounting standards have set up rules for companies to follow how to record its transactions, such as revenues recognition, match principle, and full-disclosure principle. The financial statements provided by companies should be free of material errors. Financial reporting information should have qualitative characteristics,...
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...The North Face hosts a high-energy sales meeting at high elevation Sales representatives live the brand and learn about new products at Martis Valley The Challenge The North Face wanted attendees at its Spring 2013 sales meeting to live the brand with an authentic outdoor experience. Sales representatives and corporate employees were invited to hike several miles into Martis Valley, a rural forested area more than 6,000 feet in elevation near Lake Tahoe in a remote region of the Sierra Nevada wilderness. The unique venue provided special challenges for Henry V. The Solution This massive undertaking required that Henry V transport thousands of pounds of tents, chairs, audio-video equipment and temporary power to a remote region of the Sierra Nevada wilderness in order to safely and spectacularly support an audience of nearly 500 guests. Henry V staff lodged in a RV at the remote event site for a week to support the incredible outdoor experience. A 130- by 80-foot saddle tent was the primary venue for general session presentations and meals. Inside, a mountain- shaped structure upon which video mapping projection technology was employed to paint seasonal scenes as a backdrop for presenters. Scaffolding, rock climbing wall cleats and other similar elements enabled presenters and sponsored athletes to speak from different height levels. Henry V also created a custom mobile app for sales content with social networking features for real-time feedback during breakouts. The Results ...
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...Unit: 2 The North Face Case AC503: Advanced Auditing 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an “immaterial” effect on the given financial statements? No, if we consider overall accounting. Companies shouldn’t have to adopt an auditor’s proposal. Yes, if we consider this case with North Face. You see Crawford new Deloitte’s materiality threshold and expected them to propose adjustments but ultimately pass due to the fact there was no assumed “Immaterial” impact. However, it was later realized that Crawford did not inform the Deloitte auditors of the $2.65 million portion of the barter transaction. It safer to purpose and report then purpose and pass. 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? I think so. It would avoid companies like North Face and individuals like Crawford to take advantage of these thresholds. I don’t know how feasible it would be since auditor’s live by certain standards and transparency. The goal of an auditor is to be objective and honest, by concealing materiality threshold they would doing the very thing they are trying impose. 3. Identify the general principles or guidelines that dictate when companies are entitled to record revenue. How were these principles or guidelines...
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...million trees in the last ten years, including 300,000 fruit trees in Haiti. Problem solving: Timberland is no stranger to offshore factories. With more than 300 factories in 38 different countries, Timberland exposes itself to a fair amount of environmental uncertainty. However, by spreading their resources in so many developing countries leaves them in a less risky position, as each country possesses its own political, environmental, and financial risk position. Also, Timberland is spreading the risk of pollution and erosion by producing in more than one country. Further research: VF Corporation is an American clothing corporation that sells jean wear, underwear, and work wear. VF Corporation owns Wrangler Jeans, Fruit of Loom, North Face, and 25 more clothing brands that produced over $11 Billion in revenue in 2013. They also own 28 different companies from...
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...SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 2012 Commission file number: 1-5256 V. F. CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania (State or other jurisdiction of incorporation or organization) 23-1180120 (I.R.S. employer identification number) 105 Corporate Center Boulevard Greensboro, North Carolina 27408 (Address of principal executive offices) (336) 424-6000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, without par value, stated capital $1 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO ¨ NO x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨ Indicate by check mark whether the registrant...
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...North Face Case Questions 1. Should auditors insist that their clients accept all proposed audit adjustments, even those that have an “immaterial” effect on the given financial statements? Defend your answer. No, clients are not required to accept all proposed audit adjustments that need to be made to the financial statements. However, the auditor is required to challenge management to justify not recording these adjustments. Regardless of the justification, the auditor needs to be aware that even if theses misstatements don’t effect the financial statements they can lead to material misstatements that can be in other parts of the financial statements. The possibility of prior financial statements containing material misstatements is of concern as well as material misstatements showing up in future audits. The auditor is required to document the nature and effect of the misstatements as well as the conclusion as to whether the misstatements can cause the financial statements to be misrepresented (PCAOB. 2002). 2. Should auditors take explicit measures to prevent their clients from discovering or becoming aware of the materiality thresholds used on individual audit engagements? Would it be feasible for auditors to conceal this information from their audit clients? The materiality threshold is going to vary from organization to organization but auditors have long used the materiality threshold in the preparation and audit of the financial statements of 5%. If the auditor...
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...5.3 The North Face, Inc. 1. Auditors should not insist that clients accept all proposed audit adjustments even those that have immaterial effect on the financial statements. The auditor can give their clients suggestions on where to make adjustments. If the client insists that doesn’t want to make any changes, then the auditor should exercise professional skepticism, when considering the possibility that a material misstatement due to fraud could be present (AU Section 316). 2. The auditor should design and perform audit procedures in a manner that addresses the assessed risks of material misstatement for each relevant assertion of each significant account and disclosure. In our case, auditors should not be aware of the materiality threshold. Also, the auditor should not reveal the materiality levels to their clients. For the second part of the question, it is not feasible as this information cannot be held away from the clients. Deloitte might have increased the substantive testing given Crawford’s barter transactions. 3. The FASB Concepts Statement No. 5 “Recognition Measurement in Financial Statements of Business Enterprises” and SFAS No. 48 “Revenue Recognition When Right of Return Exists” are guidelines that dictate when companies are entitled to record revenue. The two customers did not pay for the merchandise as they were made to sign for the merchandise they did not have, which means there was no exchange. Also, the transaction was not finalized until the...
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...Cindy Bachan Kaplan University AC503 Advanced Auditing Unit 3 Just For FEET, Inc. Case Study Professor Louis Beaubien December 14, 2011 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 and 1998. Given these data, comment on what you believe were the high-risk financial statement items for the 1998 Should auditors insist that their clients accept all proposed audit adjustment, even those that have an “immaterial” effect on the given financial statements? According to section 312.10 of the PCAOB standards, “the auditor’s consideration of materiality is a matter of professional judgment and is influenced by his or her perception of the needs of a reasonable person who will rely on the financial statements” (Public Company Accounting Oversight Board, 2011). This statement suggests that there are no hard and fast rules with regards to the determination of whether an adjustment is material or immaterial. In my opinion, much of the decisions are left to the auditor’s interpretation of the rule. Given all the rules and standards that both auditors and corporations must abide by, it would be wise to accept the proposed audit adjustments. Whether they are “material” or “immaterial” should not matter, because the fact that the auditor finds it necessary to propose the adjustment must be based on a rule or interpretation...
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