Accounting Discussions and Replies

Accounting Discussions and Replies

The following need Discussion Posts.

Discussion 7-
A very experienced auditor takes a new auditor, fresh out of State U, out to lunch and remarks:
“Statistical sampling is fine, but I believe the best audit techniques are based on non-statistical samples and audit issues that are spotted through observation. This is something you only get through experience.”
In two or more paragraphs, comment on the experienced auditors observations. Are they valid? Why or why not?
Also, include whether you believe statistical methods are more favorable compared to non-statistical samples. Why?

Discussion 8-
Wal-Mart Corporation is the largest retailer in the world, with sales in excess of $370 billion dollars in a recent year. Write the audit program for statistical sampling one of the following: If the topic has been chosen, please select another:
Internal control compliance-pick a topic:
1. Cash receipts
2. Cash disbursements
3. Accounts receivables
4. Accounts payables
5. Merchandise inventories
6. Payroll expense
7. Rent expense
8. Sales receipts
9. Returned items
10. Purchase order

Discussion 9-
For most companies, payroll is a major cost of operations. An auditor is routinely required to audit the payroll function and to look for fraud.
Please discuss how SAS 99 can be used when looking for fraudulent transactions as it pertains to payroll.
Your answer should be two or three paragraphs. Outside sources in this area are helpful as well.

Discussion 10-
Inventories are important accounts for auditors to review. A company with a $100 million inventory, accounted for under the LIFO method, with international purchases and sales, is your client. You are in charge of the audit. Identify issues that an auditor may need to deal with in this situation.
Your answer should be two or three paragraphs.

Discussion 11-
Explain the issues that an auditor may need to deal with in the cash accounts, especially if the company has foreign bank accounts for international transactions.
Also, would a schedule of interbank transfers be helpful? Your answer should be two or three paragraphs.

Discussion 12-
Explain why clients may want to have a review, versus an audit. In detail, explain the differences between a certified audit and a review.
In addition, what role does an internal auditor play in regards to a certified audit?
Your answer should be two or three paragraphs.

The following need replies to other students discussions (they do not need to be long, just a few sentences):

Reply 1-
As employees, in any capacity, we’re held to high ethical standards. When we fail to uphold those ethics, we can be fired, our reputation tarnished and perhaps even legal action can be taken. When a professionals choose to be unethical in the accounting field, it is a diligent auditors job to identify the deception & act accordingly.
For example, the Waste Management scandal, where executives falsified financial records. In the suit filed against them by the SEC, it stated: According to the complaint, the defendants violated, and aided and abetted violations of, antifraud, reporting, and record-keeping provisions of the federal securities laws. The Commission is seeking injunctions prohibiting future violations, disgorgement of defendants’ ill-gotten gains, civil money penalties, and officer and director bars against all defendants.
They got away with this for years for a number of reasons, but one of the most egregious ways is by their long-time auditor firm, Arthur Andersen LLP, issued unqualified audits on their account. In addition, the firm’s rates were capped by Waste Management & special bonuses were issued for unethical work.
An auditor should hold themselves and their firm to the utmost of standards. By participating and producing fraudulent information the auditors went against the core competency of their position. By producing correct and verified information this scandal could have been avoided or stopped early on.

Reply 2
The company I chose was Kohl’s. To start this process, I logged onto the website www.sec.gov. Next, I clicked on the filings tab and went to EDGAR search tools. I clicked on the link that allows you to search by company name or ticker symbol. The ticker symbol for Kohl’s is KSS, so I put KSS into the search bar and found the link for Kohl’s. Once on the Kohl’s page, I searched for 10-K in the filing type section.
“We have audited Kohl’s Corporation’s internal control over financial reporting as of February 3, 2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Kohl’s Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of February 3, 2018, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of February 3, 2018 and January 28, 2017, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended February 3, 2018, and the related notes and our report dated March 23, 2018, expressed an unqualified opinion thereon.”
This is an unqualified opinion. It does not judge the financial position of the company or interpret financial data. It is just a letter in the auditor’s report that states that the company’s financial statements conform to generally accepted accounting principles (GAAP) and have not hidden any important facts. It is issued when the auditor believes that all changes, accounting policies and their application and effects, have been disclosed

Reply 3
Currently, I work as an A/R Lead for a Logistics company. We deal very closely with a lot of documents and scenarios that would require audit evidence in the accounting department and outside the department.
One piece of auditing evidence that is considered to be excellent documentation is a clean bill of lading specifically with weight, time of delivery, where the shipment delivered & the consignees signature to verify the information. These bills are audited & billed to the customer using the information provided on the BOL. Then it’s entered into the accounting system to be posted against the correct GL.
At the end of the year, we’re given a section of invoices that we need to pull the original invoice & the compelling document, in this case, the BOL, to support our billing process to our auditor. Having clean BOLs helps everyone in this situation verify the information they need and allow us to be in compliance with our standard operating procedures. It would be “less than perfect” to bill without the evidence or an unclear copy.

Reply 4
A website I found that has a large amount of financial ratios is:
https://www.myaccountingcourse.com/financial-ratios
Two audit issues that I could think of at my current work involve inventory. I work in the stockroom of a Target. Throughout the day I store inventory received in trucks and also pull inventory from storage for others to push out to the sales floor. I’ve noticed that target has a problem with keeping track of inventory. One problem is that sometimes people pull out inventory and don’t document the exact amount. This results in Target showing we have an item in stock, when we actually don’t. This can cause a problem during audits when using the DAYS SALES IN INVENTORY CALCULATION. This ratio measures the number of days it will take a company to sell all of its inventory. The formula is (Ending Inventory/Cost of Goods Sold) x 365 days. Due to not keeping track on inventory, it will appear that Target will take a lot of time to sell its inventory because records show we have inventory of an item, when we really don’t.

Another audit issue involves the INVENTORY TURNOVER RATIO. The formula is Cost of Goods Sold/Average Inventory. This ratio is used to show how effectively inventory is being managed. At Target, we are beginning to run out of storage room. Aisles are marked with what sort of inventory can be stored in them. The problem is that Target sells seasonal items. We have so much seasonal inventory from Fall, that we have begun storing them in different aisles. This causes a problem when using the inventory turnover ratio because it shows that seasonal items aren’t being turned over so well and it is incurring storage costs.

 

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