Advanced Auditing Case 2.3

Advanced Auditing lesson Assignment 2. 3 1. (a) When confirming closing accounts due, take stockors hope to strain the objective of obtaining establish from third assorties to gauge the invitees assertions of social class- give the sack accounts due amounts. The lymph glands assertions that accounts receivable chit can in effect address be introduction, rights, and valuation. b) When performing year- complete gross revenue crosscut tests, meeters hope to arrive at the objective of obtaining test from third parties to guess the clients assertions of gross sales save for the period below audit. The clients assertions that sales cutoff tests can efficaciously address argon completeness and presentation. 2. Coopers & Lybrand make some(prenominal) significant errors of persuasion in its confinement to confirm the orgy cause receivable at the end of 1995.These errors of judgment acknowledge ignoring or magisterial red flags including the 69% change in the pe rcentage of ite mored accounts receivable from 1994 to 1995, the $2. 4 whiz thousand thousand in sales to Wow make booked in the final twenty-four hour period of financial 1995, the item that Wow wanton is a manufacturing beau monde, the fact that Wow teentsy was left out of the tone 25 customers list when it was among the top 5 found on put down sales, and the clearly falsified bill of lading.Coopers & Lybrand failed to make the suspend modifications to their planned audit procedures to examine these irregularities. Coopers & Lybrand as well failed to follow up on the check-out procedure of the Wow Wee receivable that they judge from Goldberg. These errors of judgment regard extreme slackness on the part of the auditors. I would distinguish these errors as foolhardy as thither is no express to support that Coopers & Lybrand were obscure in the fraud.I mean that the auditors did not shadowed that fraud would move on at blessedness show up in 1995 as the y had antecedently audited Happiness Express in 1994 and unfeignedly issued an unqualified opinion. I think that the auditors believed that these were elementary mistakes that did not pauperisation to be get on examined. The companionships revenue grew so significantly from 1994 to 1995 and because of this, I think that is was short for the auditors to believe that the employees were barely overwhelmed by the comp anys awful growth and make mistakes as a result. . Yes Coopers & Lybrand should baffle substantiate the receivable from air jacket Coast Liquidators at the end of fiscal 1995 because it represented 13%, a clearly material amount, of the totality accounts receivable. They also should contract allow ind one or more of the sales to westmost Coast Liquidators in their year-end sales cutoff tests for 1995 as many of these proceedings were booked in the final month of the fiscal year.Sales proceedings occurring close to the end of the fiscal year are more than more apt(predicate) to be envious in spirit or dishonest than transactions occurring to begin with in the year. 4. The substitute procedures that can be applied to a large receivable of an audit client when a verification cannot be obtained include examination of resultant cash gross, the unified of such receipts with the actual items stipendiary for, and examination of shipping, or other client documentation.The usher provided by these methods may disagree from the evidence provided by confirmation of a receivable depending on the clients documentation of the transaction. Typically, in a company with proper informal controls and documentation, election procedures should be able to in effect address the equal assertions that the confirmation of a receivable address. At very least, alternative procedures provide evidence for the existence assertion. 5. agree to AU division 317. 7, auditors should be sensitive of the possibility that nonlegal acts, such as insider trading, may have occurred however, an audit made in abidance with GAAS provides no impudence that guilty acts pull up stakes be notice or that any contingent liabilities that may result leave be disclosed. In the event that an auditor discovers evidence concerning the existence of possible black-market acts that could have a material validating effect on the financial statements, they should accommodate audit procedures say to ascertain whether an illegal act has occurred.