Essay about Case Study Question Unit 3

895 Words Feb 14th, 2014 4 Pages
JUST FOR FEET, INC. CASE STUDY QUESTIONS 1) Prepare common-sized balance sheets and income statements for Just for Feet for the period 1996-1998. Also, compute key liquidity, solvency, activity, and profitability ratios for 1997-1998. Given these data, comment on what you believe were the high-risk financial statement items for the 1998 Just for Feet audit.

2) Just for Feet operated large, high-volume retail stores. Identify internal control risks common to such businesses. How should these risks affect the audit planning decisions for such a client?
Some internal controls risks common to high-volume retail stores would be theft of inventory, inventory accounting methods, false accounts receivable confirmations, separation of
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4) Prepare a comprehensive list, in a bullet format, of the audit risk factors present for the 1998 Just for Feet audit. Identify the 5 audit risk factors that you believe were the most critical to the successful completion of that audit. Rank these risk factors from least to most important and be prepared to defend your rankings. Briefly explain whether or not you believe that the Deloitte auditors responded appropriately to the five critical audit risk factors that you identified.
Historically interpreted accounting standards aggressively placing significant emphasis on earnings, large increase in vendor allowance receivables, nonstandard accounts receivable confirmations, discrepancies in A/R amounts, and confirmations large increase in inventory 2 monthly booth income amounts Ambiguous booth assets confirmations The 5 most critical factors would be: * Large increase in vendor allowance receivables * nonstandard receivable accounts confirmations * large increase in inventory * significant emphasis on earnings * monthly booth income amounts.
The most important would be the large increase in inventory. This seemed like the biggest change from 1997 to 1999. If I were an auditor I would want to look into why the inventory amount tripled in two years and look to see if there were any misstatements. Deloitte found out that the inventory for which no items had been

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