Tuesday, May 7, 2019
Auditing Case Study Example | Topics and Well Written Essays - 1000 words
Auditing - Case Study Examplealtered year to year, these changes would ca-ca an inherent fortune that Nathans Finance would not be able to meet those requirements and ultimately financial statement would not pass the true and fair view.1. There is a risk that on that point are no appropriate controls oer revenue recording and the revenue of the next year is included in the current years figure which ultimately results in 42.5% attach in total sales.3. There is a big increase in the revenue, just now advertisement expense is only $53,445 in 2005 against $313,356 in 2006 (Nathans Finance NZ Limited, 2006). This may break off control risk because this huge increase in advertisement expense may exposed that there are no related controls.Detection risk is a risk that the audit procedures performed by the meeter will not be able to detect and prevent the material misstatement in the financial statement. some(a) of the detection risks in Nathan Finance are mentioned below,1. There i s a big increase in the revenue, but advertisement expense is only $53,445 in 2005 against $313,356 in 2006 (Nathans Finance NZ Limited, 2006) auditor may not be able to detect the potentioal oversttement in the revenue.2. Purchase of new vending machines for $11.32 million. It may either be fictional or it may be leased asset. There is a greater risk that the auditor is uneffective to detect any latent fraud of error in this significant transaction.3. Decrease in salaries and fee in comparison to last year may suggest that the management is concealing the expense to channelise higher profits, because in normal circumstances salaries expense increases. Audit procedures may fail to detect this potential error or fraud.4. Increase in intercompany advances from $60.7 million to 79.6 million. This is related parties transaction and the management can create fictitious advance which would be difficult for the auditors to detect.5. Sharp decrease in long-term finance receivables fro m $45.1 million to $34.07 million in 2006.