Sino-Forest Corporation

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Category: Business and Industry

Date Submitted: 11/28/2012 10:17 PM

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Sino-Forest Corporation

1. The primary objectives for substantive testing a client’s inventory balance are to verify the balance is correct, verify inventory existence, and verify inventory sales and purchases. The audit evidence-gathering procedures that are typically performed in testing a client’s inventory balance are confirmations, inspection, and recalculation. I think the reason Ernst and Young failed to indentify the misstated balance is because they didn’t do enough substantive testing.

2. A related-party transaction is a business deal between two parties that come together because they a have close relationship.

3. The primary conclusion that was reached by The Independent Committee was that Sino-forest was involve in a large transaction that was within the laws and for the interest of the public. The shareholders and creditors have the Ontario securities laws to accept or not to accept this conclusion.

4. Independence in appearance is how third parties would perceive the auditors independence. For example if Allen T.Y. Chan, Chairman & CEO of Sino-Forest had a brother on the auditing team. Then Chan would be perceived as not being independent in appearance. Independence in fact is where an auditor is able to makes independent decisions for the company that are not biases. The Independent Committee was created to investigate the accusations that Muddy Water had made. Some of the members of the Independent Directors for Sino-Forest, Corporation lacks independent in appearance. The 2 directors that aren’t independent in appearance are James M.E. Hyde and Garry J. West because these directors were former partner of Ernst & Young LLP in which they provide services from 24 to 35 years. Ernst & Young LLP is auditing the company for Sino-Forest. Hyde and West could be independent in fact but not independent in appearance. I believe The Independent Committee was not being independent in appearance because they weren’t able to...