Briefly explain whether or not you believe that the Deloitte auditors responded appropriately to the five critical audit risk factors that you identified. Auditing firms carry malpractice insurance to manage audit risk and the potential legal liability.
The Big Four was previously the Big Five, but Arthur Andersen lost the ability to perform audit work after being indicted on counts of obstruction of justice for its role in the Enron scandal. The risk of material misstatement is the risk that the financial reports are materially incorrect before the audit is performed.
Solution Summary Your tutorial is words and includes a list of ten audit risk factors and discussion about features of large retail chains that increase audit risk. I compared Just For Feet, Inc. Michael Knapp 1 Prepare common-sized balance sheets and income statements for Just for Feet for the period Common sized financials and ratios are in Excel attached.
The large high-volume stores also tend to have a high volume of cash This cash flow looks more like a start up than a large established retail chain. I believe that the negative cash flow from operations should be an audit flag.
The Differences Between Audit Risks The two components of audit risk are the risk of material misstatement and detection risk. Identify the 5 audit risk factors that you believe were the most critical to the successful completion of that audit. A set of common sized financial statements and ratio computations are provided in Excel.
Also compute key liquidity, solvency, activity, and profitability ratios for Rank these risk factors from least to most important and be prepared to defend your rankings.
An audit requires a CPA firm to make inquiries and perform test work on the financial statements. For example, an auditor needs to perform a physical count of inventory and compare the results to the accounting records, and this work is performed to prove the existence of inventory. The biggest thing that sticks out to me is the inventory turnover.
Typically a large chain would generate positive cash flow. How should these risks affect the audit planning decisions for such a client?Identified Just for Feet a "greater than normal" level of audit risk Failed to follow-up when not provided supporting documentation for the vendor allowances Did not test to see if receivables were paid.
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JUST FOR FEET, INC. CASE STUDY QUESTIONS. Based on Case Study Just for Feet, Inc. Contemporary Auditing Real Issues and Cases 7th ed.
Michael Knapp. 1) Prepare common-sized balance sheets and income statements for Just for Feet for the period Given these data, comment on what you believe were the high-risk financial statement items for the Just for Feet audit. 2) Just for Feet operated large, high-volume retail stores.
Identify internal control risks common to such businesses%(3). Prepare a comprehensive list, in a bullet format of the audit risk factors present for the Just for Feet audit.
Identify the five audit risk factors that you believe were most critical to.
Just for Feet Based in Birmingham, Alabama, Just for Feet (JFF) was established in and became a publicly traded company in Despite a period of slow growth in the retail industry, JFF expanded rapidly from to In planning for the audit of Just for Feet’s fiscal financial statements, the Respondents appropriately identified risks presented by the audit and planned the conduct of the audit to address them.Download