Refer to the facts described in the chapter relating to the fraud case involving 3Com.
a. What financial statement assertion did 3Com violate? Explain how it violated this management assertion.
b. Describe how the auditor could design substantive audit procedures to examine “nonrecurring gains and losses.”
c. How are outsiders harmed when companies prepare financial statements in the manner 3Com did? Does the information received by outsiders represent the “economic reality” of the transactions? Is the information received by outsiders “unbiased”?
d. Would you like to be an outsider making decisions based on inaccurate information? Explain your answer.