• Home Page
  • Toshiba Audit Risk Analysis Paper

Toshiba Audit Risk Analysis Paper

Improved Essays
Show More
Audit risk evaluation and planning materiality for the audit of “2016 Annual Report” Toshiba Corporation

A. Introduction
The auditor must assess client risk and perform audit planning after accepting client engagement. The assessment includes understanding the client, identifying factors impact the risk of a material misstatement, performing a risk and materiality assessment and developing an audit strategy (Moroney, Campbell, & Hamilton, 2014). This essay will discuss what the inherent risk and the control risk are and the impacts in planning materiality of Toshiba considering financial and non-financial information.

B. The inherent risk and the control risk relevant to Toshiba

The inherent risk in Toshiba
Inherent risk is the possibility of occurrence of material incorrect information if ignoring company’s internal control (Moroney et al., 2014). Below are three inherent risks relevant to Toshiba:
1. Risk related to business
Toshiba is one of Japan largest manufacturer company in energy and infrastructure, healthcare systems, and electronics segments requiring highly advanced technology to produce innovative and attractive products (Toshiba, 2015). However rapid changes of technology along with evolving market preference …show more content…
Inappropriate accounting issues happened in 2015 done by top management overstating company’s earnings by 15.8 billion yen (US$1.2 billion) over seven years since 2008 (Chambers, 2015), forcing Toshiba to perform a financial restatement for the year ended 2008 until 2014 and reforming its corporate governance (Toshiba, 2015). Moroney et al. (2014) revealed that fraud affects auditor judgements in determining the level of significant of audit risk. Likewise, it is argued that auditors tend to release more severe audit opinion when there are more risks inherent like the financial restatements (Qiang, Nanwei, & Gang,

Related Documents

  • Improved Essays

    Xacc/280 Week 1 Midterm Audit Case
    • 774 Words
    • 4 Pages

    Xacc/280 Week 1 Midterm Audit Case

    First, the Accuhealth’s executives clearly departed from a sound operating philosophy of ensuring appropriate accounting reports and protection from fraud loss as well as meeting external shareholders’ expectations. By embezzling cash and overstating inventory, they failed to set an ethical tone at the top for their employees and were sending a clear message to their employees that committing fraud was acceptable and needed not to be taken seriously, therefore creating an entire culture of workplace frauds. Moreover, the company’s control environment was deeply undermined by the employment of several immediate relatives and family members as the company’s top management and board of directors. The close relationships among top executives greatly diminished the independence of the board of directors from management and their abilities to exercise oversight of the development and performance of internal control, which caused ineffective monitoring of internal controls and fostered collision among officers and employees to commit…

    • 774 Words
    • 4 Pages
    Improved Essays
    Read More
  • Improved Essays

    Hrm/531 Week 4
    • 391 Words
    • 2 Pages

    Hrm/531 Week 4

    The client’s management is responsible for preparing the financial statements which auditors examine and issue a report, thus providing reliability of the financial statements by users when making economic decisions. The auditors’ report on financial statements and related disclosures for both public and nonpublic entities provides or disclaims an opinion on whether the financial statements and related disclosures are presented in accordance with the Generally Accepted Accounting Principles (GAAP) (Louwers, Ramsay, Sinason, Strawser, & Thibodeau, 2015). This opinion is the conclusion reached by the auditors after tests of controls and substantive procedures that have been performed during the audit engagement. Paragraph 10 of Auditing Standard 3101 “Reports on Audited Financial Statements” states the type of opinion the auditors may express in various circumstances (PCAOB, 2016):…

    • 391 Words
    • 2 Pages
    Improved Essays
    Read More
  • Superior Essays

    Case Study: Kroger Company
    • 1178 Words
    • 5 Pages

    Case Study: Kroger Company

    FACTORS: Statement “The Risk Assessment Standards establish standards and provide guidance concerning the auditor’s assessment of the risks of material misstatement in a financial statement audit and the design and performance of audit procedures whose nature, timing, and extent are responsive to the assessed risks.” (Risk Assessment, 2017). An auditor doing a risk assessment would look at materiality, results from previous audits both internal and externa, data sources, among others and the auditor must look at the level of risk as well. Reviewing the income statement for Kroger Company there was an increase in Sales/Revenue for the year 2017 over 2016:…

    • 1178 Words
    • 5 Pages
    Superior Essays
    Read More
  • Improved Essays

    PCAOB Lawsuit
    • 681 Words
    • 3 Pages

    PCAOB Lawsuit

    There are a lot of many different companies in many different industries across the globe. One of those industries is the accounting industry. Which has many different careers and titles; there is tax accountants, forensic accountants, financial advisors, and auditors. This essay will discuss what the PCAOB does, some consequences if firms do not do their audit correctly, a recent lawsuit, and what they did in result after the lawsuit. Like other accounting firms, the PCAOB has several duties.…

    • 681 Words
    • 3 Pages
    Improved Essays
    Read More
  • Great Essays

    Blue Nile Case Study
    • 2281 Words
    • 10 Pages

    Blue Nile Case Study

    They also repeat these statements throughout the business section of the report. For example, on pg. 8 they explain their focus on customer experience, their intent to increase supply chain efficiencies, improve operational efficiencies, expand product offerings and expand into International Markets. Further they explain in detail their commitment to a high level of customer service and support as well as fulfillment operations strategy. (pg.…

    • 2281 Words
    • 10 Pages
    Great Essays
    Read More
  • Superior Essays

    Financial And Ethical Implications Of A Civil Fraud Penalty On The Corporation
    • 1163 Words
    • 5 Pages

    Financial And Ethical Implications Of A Civil Fraud Penalty On The Corporation

    Evaluate any damaging financial and ethical repercussions of failure to include the inventory write-downs in the financial statements. Prepare a recommendation to the CFO, evaluating the negative impact of a civil fraud penalty on the corporation as a result of the IRS audit. In the recommendation, include essential internal control procedures to prevent fraudulent financial reporting from occurring, as well as the major obligation of the CEO and CFO to ensure compliance. Inventory write-downs are recorded by reducing the amount reported as inventory. Inventory write-downs include the operating expenses that the management team or the company has incurred.…

    • 1163 Words
    • 5 Pages
    Superior Essays
    Read More
  • Improved Essays

    Australian Wheat Board Case Study
    • 1099 Words
    • 5 Pages

    Australian Wheat Board Case Study

    The Australian Wheat Board (AWB) is now known as the biggest corporate corruption scandal in Australia’s history as it attempted to undercut agreements endorsed by the UN’s Oil-for-Food program by compensating the Saddam Hussein rule in Iraq through illicit payments, which infringed the programme’s intent. These bribes began while the AWB was still under government control; with illegal activity continuing after the organisation was privatised in 1999. Australia’s trade reputation was tarnished as a result of the publicised scandal on October 7, 2005. Presently, white-collar crime costs the Australian Government upwards of $8.5 billion per year; which accounts for around 40% of the total cost of crime in Australia businesses (Sanyal and Samanta…

    • 1099 Words
    • 5 Pages
    Improved Essays
    Read More
  • Improved Essays

    The Sarbanes-Oxley Act Analysis
    • 727 Words
    • 3 Pages

    The Sarbanes-Oxley Act Analysis

    SOX requires that a company’s chief executive officer and chief financial officer acknowledge several points including (1) they have personally examined the financial statements (2) the information included in the statement is accurate as far as they know (3) all material facts are included and fairly represented as far as they know (3) they are ultimately responsible for the internal controls procedures practiced by their company (4) they believe their internal controls procedures are effective (5) changes and deficiencies in internal controls have been reported (EY). By forcing executives to personally certify documents submitted to the SEC for review, the authors of SOX hoped to increase corporate accountability and restore investor confidence in the financial reporting process (EY). Corporate executives who falsely claim that their filings comply with the requirements set forth by SOX and the SEC face harsh civil and criminal penalties (EY). Corporate executives may face up to 20 years in prison or a maximum fine of $5,000,000 for knowingly and willfully certifying false reports (Morrison and…

    • 727 Words
    • 3 Pages
    Improved Essays
    Read More
  • Great Essays

    American Food Appliers Case Study Answers
    • 1475 Words
    • 6 Pages

    American Food Appliers Case Study Answers

    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.…

    • 1475 Words
    • 6 Pages
    Great Essays
    Read More
  • Improved Essays

    Market Risk Analysis
    • 829 Words
    • 4 Pages

    Market Risk Analysis

    Specific risk is the risk of losing an investment due to the company or the industry-specific hazard. An investor can only mitigate against unsystematic risk (specific risk) through diversification. An investor uses diversification to manage risk by investing in a variety of assets (Nickolas, 2015). Specific risk is the risk of your specific investment excluding the market risk. Each of the investment in has its own unique set of risks.…

    • 829 Words
    • 4 Pages
    Improved Essays
    Read More
  • Superior Essays

    Case Study Apollo Shoes Fraud
    • 1781 Words
    • 8 Pages

    Case Study Apollo Shoes Fraud

    First off this risk forces us to assess a lower level of materiality on the audit. In my professional opinion with all of the glaring risks I recommend that we set a performance materiality of $500,000 or .2% of sales, with a planning materiality of $50,000. With such low materiality and high fraud risk all auditors should be experienced staff auditors, and be on high alert of fraudulent information from Apollo employees, and must be diligent in keeping auditing procedures unpredictable as to not allow employees to cover their tracks. With the risks outlined, and the low materiality level we will need to conduct a significant amount of substantive tests, because it is the only way to get the detection risk to an acceptable level with how high the clients control risk is. To do this we will need to perform substantive testing on at least Accounts receivable, sales, Inventory, Accounts payable, expenses, prepaid expenses, and…

    • 1781 Words
    • 8 Pages
    Superior Essays
    Read More
  • Improved Essays

    Sarbanes Oxley Act Of 2002 Essay
    • 590 Words
    • 3 Pages

    Sarbanes Oxley Act Of 2002 Essay

    In the early 2000’s the United States was rocked by several companies, such as: Enron, WorldCom, Tyco and Sunbeam because these companies collaborated with their auditors and provided misleading financial reports to their investors and shareholders. Consequently, the Sarbanes Oxley Act of 2002 was enacted by the U.S. Congress to protect investors from the possibility of fraudulent accounting activities by corporations by mandating strict reforms to improve financial disclosures from corporations and preventing accounting fraud (Staff, 2017). It is vital to compare and contrast the views of management and accounting regarding changes required by the Sarbanes Oxley Act on Internal Controls and how these changes have affected corporations, accounting firms and investors. Primarily, the focus will be on comparing the views of management and accountants regarding changes under SOX.…

    • 590 Words
    • 3 Pages
    Improved Essays
    Read More
  • Great Essays

    Volkswagen Risk Management Case Study
    • 1358 Words
    • 6 Pages

    Volkswagen Risk Management Case Study

    When dealing with the term risk we think about uncertainty, the unknown and probability, how likely it is that such an event will occur. Risk management can be about other elements rather than just associated with firms and industries. Every day people are managing risks and trying to deal with risk, which portrays…

    • 1358 Words
    • 6 Pages
    Great Essays
    Read More
  • Superior Essays

    Tesla's Risk Mitigation Plan
    • 1678 Words
    • 7 Pages

    Tesla's Risk Mitigation Plan

    Risk is something that all companies take on when trying to launch a new product. Why is risk such a large factor? Think about all the man hours, testing, research, consultants and other tangible assets that it takes to launch a new product. Tesla already has two fully electronic models that they currently offer. Tesla once launched a sports car model but stopped producing it after the determining that the Model S (sedan) sales were so much better than that of the sports edition.…

    • 1678 Words
    • 7 Pages
    Superior Essays
    Read More
  • Great Essays

    Lockheed Martin Corporation Financial Analysis
    • 1653 Words
    • 7 Pages

    Lockheed Martin Corporation Financial Analysis

    Lockheed Martin Corporation SEC 10-K Paper Introduction This paper will analyze the financial statements of Lockheed Martin Corporation for the fiscal years 2015 and 2014. Lockheed Martin Corporation is a Fortune 500 company, currently at number 60 (Lockheed Martin) that is a global security and aerospace company that is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services (Who We Are). The customer base for Lockheed Martin Corporation is primarily with the U.S. Department of Defense and U.S. federal government agencies.…

    • 1653 Words
    • 7 Pages
    Great Essays
    Read More

Related Topics

Ready To Get Started?
Discover
Company
Follow
©2024 Cram.com
Privacy Policy |  About Ads |  Site Map |  Advertise  | 
  • Cookie Settings