Essay on Happiness Express

2550 Words 11 Pages
Synopsis
In 1989, two longtime sales reps in the toy industry, Joseph and Isaac Sutton, founded Happiness Express, Inc. The business model developed by the Sutton brothers involved acquiring the licensing rights to market toys and other merchandise featuring popular characters appearing in movies, television programs, and books and other publications intended principally for children. The company got off to a quick start, thanks to the uncanny ability of the Sutton brothers to identify children’s characters, such as The Little Mermaid and Barney, which would have tremendous appeal among children.
By 1994, the company had annual sales of $40 million. That same year, the Sutton brothers took Happiness Express public with a successful IPO.
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* Coopers & Lybrand was also charged with recklessly performing year-end sales cutoff tests and accounts receivable confirmation procedures during the 1995 audit. * In 2002, Coopers & Lybrand agreed to pay $1.3 million to resolve the class-action lawsuit.
Instructional Objectives * To make students aware of the need for auditors to identify the unique or atypical audit risks posed by specific industries and client business models. * To demonstrate the importance of auditors obtaining a thorough understanding of their clients operations and any major changes in those operations that has occurred since the prior year’s audit. * To demonstrate the need for auditors to thoroughly investigate large and/or suspicious yearend transactions recorded by a client. * To discuss the nature of, and audit objectives associated with, sales cutoff tests and accounts receivable confirmation procedures.
Suggestions for Use Consider using this case to illustrate the audit objectives related to accounts receivable and sales as well as the audit procedures that can be used to accomplish those objectives. In particular, this case can be used to provide students with a solid understanding of the nature and purpose of year-end sales cutoff tests and accounts receivable confirmation procedures. Another important feature of this case is that it demonstrates the need for auditors to identify and carefully consider important red flags present in their

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