Business Finance
Accounting 403 Auditing I

Question Description

I’m working on a Accounting exercise and need support.

"Audit Wrap-Up"Create a scenario that demonstrates specific ways in which management could manipulate transactions impacting inventory values that the auditing team might not detect. Recommend key strategies that the auditor could implement in anticipation of such manipulation. Justify your response.

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Final Answer

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Some of the ways in which management would manipulate transactions for the auditors not to detect include:

One, increase the income of the company with a one time gain, i.e increasing of the profits by selling of assets and recording the proceeds as a revenue to the company. Two, recording of fictitious revenue that is recording of sales that did not take place and recording investment income as revenue.

Three is failing to record liabilities and expenses when future services remain on duty. Four is to record the revenues prematurely or prior to the compleation of services.

Some of the strategies that the auditor could implement for such manipulation is: First, oversight of the internal controls whereby the auditor can obtain and review report of the company. Second, The auditors should assess the risks and the risk management policies  and lastly, they should put in mind the financial reporting risks whereby they should be able to review the financial problems encountered in the audit process and response of the management.

According to my response, if the above procedures of transactions manuplation are mantained, they can save the company in a way that the investors and corporate clients will not have worry to operate with the company.

Please let me know if you need any clarification. I'm always happy to answer your questions.

Caty (356)
Purdue University

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