...requires that an auditor discharges professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of the auditor’s ability with concern for the best interest of the public. The sole proprietor-auditor and Ernst & Whinney did not gather enough evidence on the restoration contracts, nor viewed the evidence gathered with skepticism. Between 1985 and 1986 there is a 390% increase in Revenue and 350% increase in Cost of goods sold. The auditors should question the increase in accounts receivable, which was 33% of sales and represents four months on an annualized basis. The auditors should question where the cash is from the collection of sales (Sales of $4,845 less A/R of $693 less Cost of goods sold of$2,050). The company should have approximately $2 million to pay down liabilities or invest in assets. With the cash flow with borrowings of current liabilities and notes payable, the company had approximately $6.5 million before paying cost of goods sold or approximately $4.5 to pay down liabilities or invest in the company, yet cash only increased $50,000 for the year. Where was the cash used? 1. ZZZZ Best Company, which was initially a small rug-cleaning business, was founded by Barry Minkow when he was sixteen years old. 2. Minkow transformed ZZZZ Best into a leading company in...
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...ZZZZ Best Company, Inc. Shiqi Hu, Lin Ding, Trang Mai, Yi Wang ACCT3309 Audit, O’Hara 11/03/2014 Background Barry Minkow, who is a young entrepreneur with history of credit card fraud as a teenager, was convicted on 57 counts of securities fraud. He started ZZZZ Best Company in carpet cleaning business in 1982 when he was only 16 years old. ZZZZ Best Company was turned into insurance restoration business that Minkow recognized the benefits with his own “innovative” way to finance his business. Minkow used fake restoration contracts to generate the paper profits and fake information to convince bankers to loan him money with help from his friend, Tom Padgett. The company focused on insurance restoration business and went public in 1986. First full-scope audit was completed by George Greenspan in April 1986. Ernst & Whinney was hired in 1987 after George was dismissed by Minkow. Larry Gary, auditor from Ernst & Whinney, required to visit a restoration site in a multimillion-dollar contract but was discouraged by Minkow. Minkow also required auditors to sign a confidentiality agreement that not to make any follow-up phone calls to any contractors and owners of the buildings before the visit to these phony sites. In May 1987, the Los Angeles Times published article on ZZZZ Best Company fraud accusations. Audit firms resigned after confirmations of the fraud and Ernst & Whinney received an anonymous letter that contains several allegations of fraudulent information...
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...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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...documentation that was provided by the management of ZZZZ best company, they should verified from 3rd parties the claims made by ZZZZ best in their financial statement and also audits usually work according to the audit fees charged, depended on the audit fee agreed that will determine the scope of the audit. 3. The apparently reliable evidence can lead an auditor to an improper conclusion in the case where these evidence were fraudulently designed by the management and also where the auditor did not carry out an audit test, or where he did not do a physical inspection. 4. The purpose of predecessor-successor auditor communication is to ensure possible misstatements in financial statements are communicated from one auditor to the next. The successor has the responsibility of initiating these communications. In summary information that a successor should obtain include but not limited to * Information that might bear on the integrity of management. * Disagreements with management as to accounting principles, auditing procedures, or other similarly significant matters. * Communications to audit committees or others with equivalent authority and responsibility regarding fraud, illegal acts by clients, and internal-control-related matters. * The predecessor auditor's understanding as to the reasons for the change of auditors. 5. Yes, because he was unable to ask third parties working on any of ZZZZ best’s sites any questions without breaching the contract...
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...Knapp Case 1.9- ZZZZ Best Company, Inc. 1. A review consists of an auditor performing analytical procedures and inquiries to provide a reasonable basis for obtaining limited assurance. In a review, the auditor does not give an opinion on the financial statements. He/she merely looks over the statements for any material misstatements or modifications that need to be made. Contrarily, in terms of the level of assurance, during an audit an auditor obtains a high level of assurance, expresses an opinion on accuracy and level of assurance, and tests for misstatements and the client’s internal controls. 2. The occurrence assertion is very important, especially in this case, to ensure that the financial statements of a company faithfully represent actual transactions, assets, and liabilities of the company. There were certain limitations of the evidence gathered by the procedures performed in the ZZZZ Best case with regard to the assertion of occurrence: a. Confirmations- The information obtained through George Greenspan’s confirmation seems invaluable to me based on the fact that the confirmation was only sent to Tom Padgett, especially since Tom Padgett was paid by Minkow to confirm contracts. Even though there was no way for Mr. Greenspan to know that Mr. Padgett was being paid off, I believe that he should have found more valuable information through his confirmations by sending them out to more than one person involved in the company. b. Analytical Procedures-...
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...Emilia Skupiewska-Drozd Acct. 723 Prof. A. Dignam Case 1.9 ZZZZ Best Company, Inc Question 1. Audits are expensive. For small business, the cost of an audit will run into the thousands of dollar, for large corporations the cost may exceed a million dollars. The most common reason for a small business to incur the cost of an audit is the influence exerted by a bank that insists upon audited financial statements as a condition for granting a bank loan. Sometimes the cost of audit would exceed its benefit. The alternative is to retain a public accounting firm to perform other services such as review of financial statements. A review of financial statements by public accounting firm is substantially less in scope than an audit and is designed to provide limited assurance on the credibility of the statements. It stresses inquiries by the CPA and comparison of amounts in the statements to comparable financial and nonfinancial data. These comparisons, which are referred To us as analytical procedures, are useful in bringing to light possible misstatements of financial statements amounts. The distinctions between a review and an audit are as follows: Review: • It gives limited assurance that the financial statements do not have any known errors of departures from GAAP. • It generally base on analytical procedures and inquiries. • It does not consider the client’s internal controls. Audit: • It gives reasonable assurance that the financial statements...
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...audit opinion on financial statements of ZZZZ Best but did issue a review report on the company's quarterly statements for three months ended July 31, 1986. How does a review differ from an audit particularly in terms of the level of assurance implied by auditor's report? 2. SAS No. 106 "Audit Evidence," identifies the principal "management assertions" that underlie a set of financial statements. The occurrence assertion was particularly critical for ZZZZ Best's insurance restoration contracts. ZZZZ Best's auditors obtained third-party confirmations to support the contracts, reviewed available documentation, performed analytical procedures to evaluate the reasonableness of the revenues recorded on the contracts, and visited selected restoration sites. Comment on the limitations of the evidence that these procedures provide with regard to the management assertion of occurrence. 3. In testimony before Congress, George Greenspan reported that one means he used to audit the insurance restoration contracts was to verify that his client actually received payment on those jobs. How can such apparently reliable evidence lead an auditor to an improper conclusion? 4. What is the purpose of predecessor-successor auditor communications? Which party, the predecessor or successor auditor, has the responsibility for initiating these communications? Briefly summarize the information that a successor auditor should obtain from the predecessor auditor. 5. Did the confidentiality agreement that...
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...Phần 1 Ngày 19 tháng 5 năm 1987, một bài viết ngắn trong The Wall Street báo cáo rằng ZZZZ Company, Inc ..Reseda, California, đã ký một hợp đồng trị giá 13,8 triệu USD bảo hiểm cho dự án phục hồi. dự án này chỉ là gần đây nhất của một loạt các công việc phục hồi lớn có được của ZZZZ Best (phát âm là "Zee Best"). Nằm ở San Fernando Valley của miền nam California, ZZZZ Best đã bắt đầu hoạt động vào mùa thu năm 1982 giống như 1 doanh nghiệp nhỏ, với hoạt động là làm sạch thảm tại từng nhà. Dưới sự chỉ đạo của Barry Minkow, 1 người hoạt bát và hướng ngoại mới 16 tuổi đã thành lập công ty và bước đầu hoạt động nó từ nhà để xe của cha mẹ, Zzzz Best có những kinh nghiệm bùng nổ tăng trưởng doanh thu và lợi nhuận trong những năm đầu tiên tồn tại của nó. Trong ba năm từ 1984 đến 1987, thu nhập ròng của công ty tăng từ ít hơn $200000 đến hơn $5 triệu trên tổng doanh thu $50 triệu USD. Năm 1986 ZZZZ Best trở thành công ty cổ phần và lên sàn, Minkow và một số các cộng sự thân cận của ông đã trở thành triệu phú trong 1 đêm. Bởi vào cuối mùa xuân năm 1987, giá trị thị trường của cổ phiếu công ty Minkow vượt quá $ 100 triệu USD, trong khi tổng giá trị thị trường của ZZZZ Best đã vượt ngưỡng 200 triệu USD. Giám đốc điều hành trẻ nhất trên cả nước được hưởng "good life", trong đó bao gồm một ngôi nhà sang trọng trong một khu ngoại ô của Los Angeles và một chiếc ô tô Ferrari màu đỏ. Minkow có 1 sức hút và với tài năng kinh doanh đã làm cho anh thành người được săn đón trên các chương trình truyền...
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...Auditing Concepts ZZZZ Best Company, Inc Case Solutions: 1. A review is performed to obtain a reasonable basis for providing limited assurance that the client's financial statements have been prepared in conformity with generally accepted accounting principles. An independent audit is designed to provide a reasonable basis for expressing an opinion concerning whether or not a client’s financial statements have been prepared in accordance with generally accepted accounting principles. There is also a major difference between a review and an audit in terms of the scope of work performed. When a review is done, the main evidence collection techniques are analytical procedures and inquiries of client personnel. Whereas, in an audit, the full range of evidence collection techniques available to an auditor is likely to be used. A review does not assess control risk, tests of accounting records and responses to inquiries by obtaining validating evidence through inspection, observation or any other audit procedure. It can point out significant matters of the financial statements but does not provide assurance of their accuracy. Because reviews are generally not as rigorous as audits, considerably less evidence is typically collected in a review than in a comparable audit engagement. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any material misstatements on the financial statements. 2. Third party confirmations should...
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... E T S T A R T E D Visit www.custom.cengage.com/makeityours/knapp7e to make your selections and provide details on anything else you would like to include. Prefer to use pen and paper? No problem. Fill out questions 1-4 and fax this form to 1.800.270.3310. A Custom Solutions editor will contact you within 2-3 business days to discuss the options you have selected. 1. Which of the following cases would you like to include? Section 1: Comprehensive Cases 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 Enron Corporation Just for FEET, Inc. Jamaica Water Properties Health Management, Inc. The Leslie Fay Companies Star Technologies, Inc. Lincoln Savings and Loan Association Crazy Eddie, Inc. ZZZZ Best Company, Inc. United...
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...Case 1.9 ZZZZ Best Company, Inc. 1. A review is similar to an audit but is less in scope and only provides limited assurance in regards to the presentation of the financial statement. This differs with an audit that gives reasonable assurance that no material errors or illegal acts are detected. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review does not provide a basis for the expression of such an opinion because a review does not involve obtaining an understanding of the internal control structure or assess control risk, tests of accounting records and of responses to inquiries by obtaining corroborating evidential matter through inspection, observation or confirmation, and certain other procedures ordinarily performed during an audit. A review mostly involves inquires of client personnel and analytical procedures. In a review an accountant does not give an opinion as to the fair presentation of the financial statements, reasonable assurance. Instead the accountant states that no material modification came to his/her attention in order for the statements to be in conformity with generally accepted accounting principles, limited assurance. 2. As it relates to the assertion of occurrence and existence, third-party confirmations are usually highly reliable and auditors normally seek these out for a complete audit. While these forms of evidence can be reliable this isn’t...
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...review service provides a moderate amount of assurance on the financial statements, and less evidence is necessary to support this level of assurance. Whereas audit provides a high level of assurance. 2. The Limitations of Management assertion of existence: First ZZZ Best auditor George Greenspan performed audit for 12 months ended April 30, 1986. According the case: He confirmed the existence of ZZZ Best major insurance contracts by contacting Tom Padgett. He not only confirmed their existence but also obtained and reviewed copies of all key documents regarding those jobs. However, Greenspan did not inspect any of the insurance restorations. As I understood from the case, If auditor satisfied that these jobs exist by different sources (existence according the paper documents) he is not required to conduct personal on-site inspection. Or if physical observation is not relevant or too costly auditors obtain the next best evidence available. This is the one of limitations of management assertion of existence The next auditor of ZZZ Best Larry Grey (Ernst and Whinney) besides getting evidence in paperwork, he conducted on-site inspection of one of the biggest restoration site contracts of ZZZ Best. But Ernst and Whinney didn’t corroborate the evidence of existence from all different sources (most reliable eternal evidence which is independent from the Co.). They didn’t take into account that...
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...Fordham University Graduate School of Business ACGB 7171 Auditing of Accounting Systems I—Fall 2013 Course Objectives: The objective of this course is to introduce students to the auditor’s decision-making process in both an audit of financial statements and an audit of internal controls over financial reporting. The class consists of lecture, individual case studies and in class exercises. Students are given an introduction to the following topics: • Generally Accepted Auditing Standards (GAAS) • The AICPA Code of Professional Conduct and its related rules and interpretations • An auditors’ legal responsibilities • Auditors professional judgment • The evaluation and testing of internal controls • The effect of IT on the audit process • The development of an audit program • PCAOB standards • The auditor's reports Book: Auditing and Assurance Services by Arens, Elder and Beasley 14ed Publisher Pearson/PrenHall ISBN 978013257595 |2013 |Topic |Assignment/Chapter to read | |Thursday September 5th |Introduction to the CPA Profession and the Auditing |Chapters 1 and 2 | | |Environment | | | | ...
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...|FOR INDIVIDUAL & OTHER TAXPAYERS (OTHER THAN COMPANY) | FORM OF RETURN OF INCOME UNDER THE INCOME TAX ORDINANCE, 1984 (XXXVI OF 1984) Put the tick (() mark wherever applicable 1. Name of the Assessee: Mohammad Abu Baker Siddick 2. National ID No (if any) : 525501546008 |3. UTIN (if any): | | | | 14. Address (a) Present: Deputy Director , Anti Corruption Commission, Head Office , 1, Segun Bagicha, Dhaka-1000 ........................................................................................................ ........................................................................................................ (b) Permanent: 8/2 Rankin Street, Wari, Dhaka-1203............................................. ........................................................................................................ ......................................................................................................... 15. Telephone: Office/Business +88-02-9339162.. Residential: +88-02-9511884....................... 16. VAT Registration Number (if any): .......................................................................................... Statement...
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... Application of Ethical Reasoning in Accounting DigitPrint Case 33 32 Conclusion 34 Discussion Questions 34 Endnotes 36 Chapter 2 Cases 37 2 Case 2-1: A Faulty Budget 38 Case 2-2: Better Boston Beans 39 Case 2-3: Eating Time 40 Case 2-4: Is Internal Whistle-Blowing "Right"? Case 2-5: Play Ball 43 Case 2-6: Supreme Designs, Inc. 44 Case 2- 7: The City of West Buckle 46 Case 2-8: The CPA Review Course 47 Case 2-9: The Ethics ofiPod-ing 48 Case 2-10: The Tax Return 49 Distinguishing between Ethics and Morality Religious and Philosophical Foundations of Ethics 3 Teleology 4 Deontology 6 41 Acting with Integrity Personal Integrity 8 7 The Moral Point of View 7 The Six Pillars of Character.... 8 Trustworthiness 8 Respect 10 Responsibility 10 Fairness 11 Caring 11 Citizenship 12 Chapter 3 Ethical Decision Making in Business 50 What Is Business Ethics? 51 Ethical Issues in Business 51 Virtue, Character, and CPA Obligations 12 Scope and Organization of the Text 12 Conclusion 14 Discussion Questions 14 Endnotes 15 Chapter 1 Cases 17 Case 1-1: A Student s Dilemma 18 Case 1-2: Giles and Regas 19 Case 1-3: Jason Tybell 21 Case 1-4: Lone Star School District 23 Case 1-5: Reneging on a Promise 24 Foundations of Corporate Governance...
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