American Food Supplies Inc.
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1. Lessons learnt with regards to over reliance on a third party confirmation
Confirmation is a process of gathering and evaluating third party direct communication in response to a request for details regarding individual items that affect a company 's financial statement assertions. In the American food suppliers’ case study, third party confirmation was used where they relied on the vendors’ sales people. The audit team investigating the company did not rely on the accounting department of the American Food Suppliers’. However, employees of American Food Suppliers had colluded with some of it, suppliers. On further investigation, the auditors discovered …show more content…
First, during an audit, an auditor should ensure that they obtain the appropriate assurance to tackle the audit risk. Many people assume that the information gathered from the third party is more reliable than the evidence collected by the audited company. However, in the case study, the company had already colluded with its suppliers to provide false information to the audit team, and this jeopardized the review process. Therefore, it is advisable for an auditor to ensure that they maintain a professional skepticism by considering previous audit reports and the relationship between the audit client and the third party. Consequently, over-reliance on a third party during an auditing process, although proven to be efficient since it is free from adjustment or influence by the client audit. An auditor should ensure that they assess the clients’ financial statement by conforming to existence, rights an obligation, completeness, valuation and presentation and …show more content…
They American Food Supplier asked their suppliers to provide false documentation regarding the money owed and the purchase documentation. Ethics governs the behavior of people as well as groups of people and distinguishes between good and evil, right and wrong (Maicibi & Yahaya, 2013). The case provides evidence of how the company was not ethical as it was involved in unethical activities that led to the loss of millions. As a result of the immoral activities, the company lost approximately two-thirds of its stock price value, Chief Executive Officer and Chief Financial Officer lost their jobs. Also, high-level managers from parent company stepped down to pave the way for
Students Name:
College:
Case Study:
Date:
1. Lessons learnt with regards to over reliance on a third party confirmation
Confirmation is a process of gathering and evaluating third party direct communication in response to a request for details regarding individual items that affect a company 's financial statement assertions. In the American food suppliers’ case study, third party confirmation was used where they relied on the vendors’ sales people. The audit team investigating the company did not rely on the accounting department of the American Food Suppliers’. However, employees of American Food Suppliers had colluded with some of it, suppliers. On further investigation, the auditors discovered …show more content…
First, during an audit, an auditor should ensure that they obtain the appropriate assurance to tackle the audit risk. Many people assume that the information gathered from the third party is more reliable than the evidence collected by the audited company. However, in the case study, the company had already colluded with its suppliers to provide false information to the audit team, and this jeopardized the review process. Therefore, it is advisable for an auditor to ensure that they maintain a professional skepticism by considering previous audit reports and the relationship between the audit client and the third party. Consequently, over-reliance on a third party during an auditing process, although proven to be efficient since it is free from adjustment or influence by the client audit. An auditor should ensure that they assess the clients’ financial statement by conforming to existence, rights an obligation, completeness, valuation and presentation and …show more content…
They American Food Supplier asked their suppliers to provide false documentation regarding the money owed and the purchase documentation. Ethics governs the behavior of people as well as groups of people and distinguishes between good and evil, right and wrong (Maicibi & Yahaya, 2013). The case provides evidence of how the company was not ethical as it was involved in unethical activities that led to the loss of millions. As a result of the immoral activities, the company lost approximately two-thirds of its stock price value, Chief Executive Officer and Chief Financial Officer lost their jobs. Also, high-level managers from parent company stepped down to pave the way for