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10-21
10-34 (continued)
7. a. Sales may be fictitiously recorded before any goods were
shipped.
b. Sales and accounts receivable.
(occurrence).
8. a. Fictitious sales transactions may have been entered to
b. Sales and accounts receivable.
Case
10-35 a. There are many fraud risk factors indicated in the dialogue. Among
the fraud risk factors are the following:
A significant portion of Mint’s compensation is represented
by bonuses and stock options. Although this arrangement
Mint’s statement to the stock analysts that SCS earnings
would increase by 30% next year may be both an unduly
The SCS audit committee may not be sufficiently objective
One individual, Mint, appears to dominate management
without any compensating controls. Mint seems to be making
There were frequent disputes between Brown, the prior
CEO, who like Mint apparently dominated management and
Management seems satisfied with an understaffed and
ineffective internal audit department. This situation displays
10-22
10-35 (continued)
Management has failed to properly monitor and correct a
Information about anticipated future layoffs has spread
among the employees. This information may cause an
b. Kent has many misconceptions regarding the consideration of
fraud in the audit of SCS financial statements that are contained
in the dialogue. Among Kent’s misconceptions are the following:
Kent states that the auditor does not have specific duties
Kent is not concerned about Mint’s employment contract.
Kent should be concerned about a CEO’s contract that is
Kent does not think that Mint’s forecast for 2017 has an
effect on the financial statement audit for 2016. However,
Kent believes the audit programs are fine as is. Actually,
Kent is not concerned that the internal audit department
is ineffective and understaffed. In fact, Kent should be
Kent states that an auditor provides no assurances about
fraud because that is management’s job. In fact, an auditor
Kent is not concerned that the prior year’s material weakness
in internal control has not been corrected. However, Kent
10-23
10-35 (continued)
a risk factor relating to misstatements arising from
Kent does not believe the rumors about big layoffs in the
next month have an effect on audit planning. In planning
c. Auditing standards require that auditors document the following
matters related to the auditor’s consideration of material misstatements
due to fraud:
The discussion among engagement team personnel in
Procedures performed to obtain information necessary to
Specific risks of material fraud that were identified, and a
Reasons supporting a conclusion that there is not a
Results of the procedures performed to address the risk of
Other conditions and analytical relationships that indicated
The nature of communications about fraud made to
After fraud risks are identified and documented, the auditor should
10-24
Integrated Case Application
10-36
PINNACLE MANUFACTURING―PART III
a. The following are some of the fraud risk triangle factors that
students may identify from Parts I and II:
Incentives/Pressures
1. Pinnacle’s board is considering selling the Machine-Tech
making it profitable (Part I).
Opportunities
(Part I)
(Part I and II).
Attitudes/Rationalizations
1. Pinnacle has had disputes with the IRS (Part II).
business depends on developing technology. These characteristics
the incentives identified in part a.
Technique to
overstate revenue
Audit technique to determine
if fraud is occurring
Record sales in subsequent
period as current sales.
Examine shipping documents for sales
recorded before year end.
Ship goods to customers that
were not ordered.
1. Examine customer orders for goods
shipped before year-end
2. Confirm accounts receivable.
it could suggest revenue recognition fraud.
2. The decline in depreciation and bad debt expense, which
10-25
10-36 (continued)
e. Potential fraud risks from Part II
Fraud risk
Fraud Triangle Element (if yes)
1.
Yes
Motivation (justify commitment to solar)
2.
Yes
Opportunity
3.
Yes
Opportunity (related party transaction)
4.
Yes
Opportunity
5.
Yes
Opportunity
6.
No
7.
Yes
Opportunity (related party transaction)
8.
Yes
Opportunity
9.
Yes
Incentives
10.
Yes
Attitude/rationalization
11.
Yes
Opportunity (related party transaction)
10-37 ACL Problem
a. The total of the Amount column for all Pcard purchases is
b. There are 101 Pcard transactions that are >$1,000 each. (Use the
Note: A printout of the output is shown on the next page. Note
that this file was produced by exporting the saved file to Excel.
10-37
(continued)
AccountNumber
ReferenceNumber
VendorNumber
VendorName
VendorLocation
UnitCost
Quantity
Amount
4556278201837269
0000013993812376
00015200563
ABC Furniture Co.
Shakopee, MN
1312.5
1
$1,312.50
4074095856238491
0000013998829656
11039200403
Office Furnishings Ltd.
Huntsville, AL
1050
1
$1,050.00
4556174795046393
0000014000128274
00030000914
Park It Furnishings
Briarcliff Manor, NY
1312.5
1
$1,312.50
4074095856238491
0000014000587370
01130400892
NuevoTech Co.
Oakland, CA
1050
1
$1,050.00
4929096239434630
0000014002903958
0116800929
Direct Computer Ltd.
Salt Lake City, UT
1275.1
1
$1,275.10
4539553914386503
0000014010231358
00029200138
Meridian Industries
Huntington, NY
2475
1
$2,475.00
4074095856238492
0000014010483821
0016000281
Mowza Computers Ltd.
Austin, TX
3444
1
$3,444.00
4929974631026206
0000014023924210
10114000561
Merrick Business Warehouse
Merrick, NY
2025
1
$2,025.00
4929096239434630
0000014024618430
00029200138
Meridian Industries
Huntington, NY
1800
1
$1,800.00
(note we do not show the full printout. Instead, this solution shows the first 10 records and the last five records).
4779713793834655
0000014234115982
10114000561
Merrick Business Warehouse
Merrick, NY
1190
1
$1,190.00
4539662715148630
0000014235896370
00140067
United Equipment
Bronx, NY
1639.4
1
$1,639.40
4823970469096508
0000014236264443
00011200575
Bronx Office Supplies
Bronx, NY
1068.7
1
$1,068.70
4486018831745861
0000014237410569
01014800935
Ping Systems
Long Island City, NY
1050
1
$1,050.00
4009024143997131
0000014239003673
00029200138
Meridian Industries
Huntington, NY
1062.5
1
$1,062.50
10-26
Copyright © 2017 Pearson Education, Inc.
10-27
10-37 (continued)
VendorName
COUNT
Amount
Merrick Business Warehouse
1362
418331.71
Winston Manufacturing
1195
362272.67
Omega Tech Inc.
1141
346182.24
#10039200418 and #10114000561. If students used the
VendorNumber field when they use the Summarize command,
identify all Pcard transactions for vendor number ‘10039200418’
and ‘10114000561’ and then use Quick Sort to sort the transactions
10-37 (continued)
VendorName
VendorNumber
Description
UnitCost
Quantity
Amount
Merrick Business Warehouse
10114000561
Workstaion Desk W/ High Mount Book Case And Filing
$2,025.00
1
$2,025.00
Merrick Business Warehouse
10114000561
Orbit Desk, Tiger Oak
$1,925.00
1
$1,925.00
Merrick Business Warehouse
10114000561
Workstaion Desk W/ High Mount Book Case And Filing
$1,912.50
1
$1,912.50
Merrick Business Warehouse
10114000561
Workstaion Desk W/ High Mount Book Case And Filing
$1,912.50
1
$1,912.50
Merrick Business Warehouse
10114000561
Carnegie Bay L-Shaped Workcentre With Hutch
$1,750.00
1
$1,750.00
Merrick Business Warehouse
10114000561
Carnegie Bay L-Shaped Workcentre With Hutch
$1,750.00
1
$1,750.00
Merrick Business Warehouse
10114000561
Orbit Desk, Tiger Oak
$1,487.50
1
$1,487.50
Merrick Business Warehouse
10039200418
MS Project
$1,480.00
1
$1,480.00
Merrick Business Warehouse
10114000561
Orbit Desk, Tiger Oak
$1,400.00
1
$1,400.00
Merrick Business Warehouse
10114000561
Carnegie Bay L-Shaped Workcentre With Hutch
$1,375.00
1
$1,375.00
Merrick Business Warehouse
10114000561
Carnegie Bay L-Shaped Workcentre With Hutch
$1,375.00
1
$1,375.00
Merrick Business Warehouse
10114000561
Carnegie Bay L-Shaped Workcentre With Hutch
$1,375.00
1
$1,375.00
Merrick Business Warehouse
10114000561
Workstation
$1,375.00
1
$1,375.00
Merrick Business Warehouse
10039200418
19" Daytek 953Df Flat 1280X1024 .25Dp
$1,350.00
1
$1,350.00
Merrick Business Warehouse
10114000561
Workcentre, Cognac/Graphite
$1,211.20
1
$1,211.20
Merrick Business Warehouse
10114000561
Classic Workstation Collection. Choco/Pear
$1,190.00
1
$1,190.00
10-28
10-37 (continued)
AccountNumber
VendorNumber
VendorName
Description
UnitCost
Quantity
Amount
4486230080202821
10039200418
Merrick Business Warehouse
17" Samsung 171S LCD Screen Black
990
1
$990.00
4929974631026206
10114000561
Merrick Business Warehouse
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4024007182132398
00124000386
Winston Manufacturing
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4916465731737599
00029200138
Meridian Industries
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4450317223843348
0002000138
PC Upgrade Depot
17" Samsung 171S LCD Screen Black
990
1
$990.00
4450317223843348
0002000138
PC Upgrade Depot
17" Daytek Mv170 LCD Screen
990
1
$990.00
4556840201547394
10025200753
Ping Supplies
Intel Celeron 2000 W/128K Cache Socket478
990
1
$990.00
4556282154271112
01032400455
Executive Impressions
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4916993100104703
01014800221
Furniture Store Online
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4532306581131117
10025200753
Ping Supplies
Intel Celeron 2000 W/128K Cache Socket478
990
1
$990.00
4539328836180627
00124000386
Winston Manufacturing
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4009024143997131
00030000914
Park It Furnishings
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4539945648459640
00019600363
A la Mode Computers
Asus P4S533-Vm ,W/Audio,
400/533Fsb,1AGP,3Pci,2Xdd
990
1
$990.00
4532991674023634
1005600877
Omega Tech Inc.
Asus P4S533-Vm ,W/Audio,
400/533Fsb,1AGP,3Pci,2Xdd
990
1
$990.00
4024007130590945
101840081
IT Shop
17" Daytek 755Df Flat 1280X1024 .25Dp
990
1
$990.00
4556386102174466
00030000914
Park It Furnishings
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556174795046393
00011200575
Bronx Office Supplies
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556278201837269
10124400457
Executive Design Workspaces
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4009024143997131
11122000228
D - Quadrant Designs
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556174795046393
1005600877
Omega Tech Inc.
17" Daytek Mv170 LCD Screen
990
1
$990.00
4139617133884335
1005600877
Omega Tech Inc.
17" Phillips 170B2B LCD Screen
990
1
$990.00
10-29
10-37 (continued)
4024007162825466
10114000561
Merrick Business Warehouse
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4539688053589762
00124000386
Winston Manufacturing
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4486664772641328
1004000994
Superior Tech Partners Inc.
17" Daytek Mv170 LCD Screen
990
1
$990.00
4486854368049826
00015200563
ABC Furniture Co.
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556611633720416
10114000561
Merrick Business Warehouse
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4916675816022846
0115600322
Bell Computer Supplies
17" Daytek Mv170 LCD Screen
990
1
$990.00
4024007101839644
10130800575
Techno Electronic Store
17" Daytek 755Df Flat 1280X1024 .25Dp
990
1
$990.00
4532883667107831
11012800678
Used Furniture World
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4716858305810788
00124000386
Winston Manufacturing
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556174795046393
00015200563
ABC Furniture Co.
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4716883599206303
00024800752
Ed's Electronic Warehouse
17" Daytek 755Df Flat 1280X1024 .25Dp
990
1
$990.00
4024007173939678
00015200563
ABC Furniture Co.
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4221399997254926
0115600322
Bell Computer Supplies
Intel Pentium 4 - 2.53 Ghz W/512K Cache 533Fsb
990
1
$990.00
4532942978384818
00015200563
ABC Furniture Co.
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4024007190604263
10114000561
Merrick Business Warehouse
Desk With Return And Hutch, Black/Silver
990
1
$990.00
4556278201837269
00019600363
A la Mode Computers
17" Daytek 755Df Flat 1280X1024 .25Dp
990
1
$990.00
4539945648459640
00032000325
Terrabyte Computer Center
17" Daytek 755Df Flat 1280X1024 .25Dp
990
1
$990.00
10-30
