A Case Study On Lowell, Inc.

1237 Words 5 Pages
Excellent summary of the case study; I did not have to read it to understand what is going on. All the important facts are covered. I just noted how Avis who is initially excited by the fact that she uncovered fraud, and then becomes concerned or disappointed because one of the involved manager, Mo Rappelle, with whom she has become well acquainted. And the fact that Mo backdated sales to increase his year-end bonus by slightly more than $100, which has clearly an immaterial impact on Lowell, Inc.’s operating results the year just ended (Knapp, 2015). Nevertheless, fraud is fraud regardless of the impact on the Business.
Questions
I agree with you that it is not appropriate for Avis to substitute another store for Mo’s store with whom she
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And AS 2315: Audit Sampling (AU Section 350.26 reorganized) of the PCAOB, in paragraph 26, notes “The auditor should project the misstatement results of the sample to the items from which the sample was selected. There are several acceptable ways to project misstatements from a sample”. Avis could have performed the following method as explained in the standard:
“For example, an auditor may have selected a sample of every twentieth item (50 items) from a population containing one thousand items. If he discovered overstatements of $3,000 in that sample, the auditor could project a $60,000 overstatement by dividing the amount of misstatement in the sample by the fraction of total items from the population included in the sample. The auditor should add that projection to the misstatements discovered in any items examined 100 percent. This total projected misstatement should be compared with the tolerable misstatement for the account balance or class of transactions, and appropriate consideration should be given to sampling risk. If the total projected misstatement is less than tolerable misstatement for the account balance or “class of transactions, the auditor should consider the risk that such a result might be obtained even though the true monetary misstatement for the population exceeds tolerable misstatement (PCAOB,

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