ACC 476/726 – Auditing
Discussion Case Questions Fall 2004

General Information

The audit discussion cases are real-world examples of problems that auditors face in practice. Each individual case is brief, and every member of the class should read the case prior to class and come prepared to participate in class discussion.

Instead of the questions in the casebook, we will discuss specific issues related to the topic currently being discussed in class. The questions can usually be answered using your own opinions and the case information. The issues to be discussed for the cases follow.

Berkshire Hathaway – Tuesday, September 7, 2004

Background: The case captures the dynamics of auditor-client relations. The SEC has …show more content…

Where would you look for manipulations of earnings?
5. The company’s executives rejected the controller’s recommendation to disclose the reversal of the rainy day reserves. What should the controller have done? Suppose you discovered a misstatement in a client’s earnings, but the manager and partner told you to ignore it. What would you do?

ACC 476/726 – Fall 2004

Discussion Case Questions

Regina Vacuum – Thursday, September 23, 2004

Background: Regina is one of many high profile frauds involving manipulation of receivables and inventory. Often, these types of frauds can be readily identified through analytical procedures. Actors: Don Sheelen, KPMG partner, Regina chairman (Group 8 – Liz Dwyer, John Orcutt, Chuck Sullivan)

1. Regina was sued for false advertising in an ad. Should that have affected how the auditors approached the audit?
2. What aspects of the fraud were most difficult to detect? What procedures should have allowed the auditor to detect them?
3. Calculate gross margin, inventory turnover, and accounts receivable turnover. What specific problems do these ratios identify?
4. The auditors detected one ship-in-place transaction, but were informed by the client there were no additional ship-in-place transactions. What should the auditors have done?
5. A CPA firm official stated, "We're only human, and prefer to trust the people we are auditing." What is the