Auditing Case

Auditing Cases

An Interactive Learning Approach

FIFTH EDITION

MARK S. BEASLEY FRANK A. BUCKLESS STEVEN M. GLOVER DOUGLAS F. PRAWITT

PEARSON

Boston • Columbus • Indianapolis • New York • San Francisco • Upper Saddle River Amsterdam • Cape Town • Dubai • London • Madrid • Milan • Munich • Paris • Montreal • Toronto Delhi • Mexico City • Sao Paulo • Sydney • Hong Kong • Seoul • Singapore • Taipei • Tokyo

TABLE

SECTION

OF CONTENTS

Client Acceptance

3

CASES INCLUDED IN THIS SECTION

1.1

Ocean Manufacturing, Inc

The New Client Acceptance Decision

SECTION

9 ^

Understanding the Client's Business and Assessing Risk

13

CASES INCLUDED IN THIS SECTION

2.1

Yourl040Return.com

Evaluating eBusiness Revenue Recognition, Information Privacy, and Electronic Evidence Issues

2.2 2.3 2.4

Dellinc

Evaluation of Client Business Risk

17 21 41

Flash Technologies, Inc

Risk Analysis

Asher Farms Inc

Understanding of Client's Business Environment

SECTION

j

Professional and Ethical Issues

—

CASES INCLUDED IN THIS SECTION

3.1 3.2 3.3 3.4 3.5

A Day in the Life of Brent Dorsey

Staff Auditor Professional Pressures

47 51 53 57 63

Nathan Johnson's Rental Car Reimbursement

Should He Pocket the Cash?

The Anonymous Caller

Recognizing It's a Fraud and Evaluating What to Do

WorldCom

The Story of a Whistleblower

Hollinger International

Realities of Audit-Related Litigation

TABLE

OF CONTENTS

SECTION

4.1 4.2 4.3

q

Accounting Fraud and Auditor Legal Liability

75 89 97

CASES INCLUDED IN THIS SECTION

Enron Corporation and Andersen, LLP

Analyzing the Fall of Two Giants

Comptronix Corporation

Identifying Inherent Risk and Control Risk Factors

Cendant Corporation

Assessing the Control Environment and Evaluating Risk of Financial Statement Fraud

4.4 4.5 4.6 4.7

Waste Management, Inc

Manipulating Accounting Estimates

. 103 111 119 133

Xerox Corporation

Evaluating Risk...