POST ACC522 Unit 6 Discussion Latest 2018 October

ACC522 Advanced Audit Issues

Unit 6 Discussion

Read Case 8 – Observation of Physical Inventory Count about Lakeside Company

There is a discrepancey between the perpetual inventory records of Lakeside Company when compared against the physical count.

Questions:

1) Is this difference a material amount that would justify further investigation by Abernethy and Chapman (A & C)? Why or why not?

2) Management may sometimes deliberately attempt to either overcount or undercount ending inventory. Explain the rationale behind this type of irregularity. In your opinion, does this potential problem exist with Lakeside Company? Explain the level of significance.

3) Let's assume that a material misstatement occurs in counting Lakeside's inventory that A & C did not discover until the audit was completed and the audited financial statements were released. What is the CPA firm's responsibility for such misstatements?

Audit standards require the auditor to accumulate sufficient appropriate evidence to support the opinion issued.

The specific methods of gathering evidence depend largely on the type of account in question an the auditor's judgment.

Now, it's your turn to put this into practce. From the cases that we have gone over with Lakeside Company, do the following:

Choose 3 accounts that you need to gather evidence for

For each account, name, describe and defend evidence-gathering techniques that in your opinion are appropriate for the accounts you are testing.

Describe the relative significance and reliability of each technique.