Jack Greenberg, Inc. Essay example

930 Words Dec 12th, 2010 4 Pages
Jack Greenberg, Inc.

1. Family owned business is a business that is owned by one family, most of the shareholders are from the same family. One of the major problems in this type of business is a conflict in interests among the family’s member. The auditor should be careful and observe the type of the relationship among the family’s member. There should be a written agreement to specify rights, duties, and obligations for each member, the auditor should read those documents for further information. One issue that faced the auditor is to understand the attitude of each member, the risk of manipulating facts can be existed due to the close relationship. In the case of Jack Greenberg, the son has manipulated the numbers in the record
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Most auditors traditionally have viewed walkthroughs as the procedure of choice when attempting to develop an understanding of key processes and internal controls of a client. Now, walkthroughs are required when certifying financial reporting controls under Section 404 of the U.S. Sarbanes-Oxley Act of 2002. As it relates to Audit Standard No. 2 from the PCAOB, the standard includes a requirement that the auditor must perform a walkthrough for each of the company’s significant processes.

5. I would highly recommend that the auditor should extend the scope of substantive test and increase the sample size in order to discover other misstatements that existed. The auditor also could trace documents to testify whether the inventory has been listed accurately. Analytical procedure and test of detail as part of substantive test to find the relationship between the inventory account and other accounts in the financial statements. Cut off test with physical observation to the inventory would help to discover fraud and any misstatement in the inventory account. In addition, the auditor may use confirmation to confirm amount listed in the record with third parties.

6. I think the audit firm responsibility is to inform the client that there are weaknesses in their current internal control however the audit firm does not have the right to force the client to do some action regarding those

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