audit accounting

Worthington Department Stores Auditing standards require the auditor to obtain sufficient appropriate audit evidence (AS 1105.04: Audit Evidence). The audit firm of Hepple & Ramsey was investigated for the audit of Worthington. Worthington is a large discount catalog department store chain. The company recently expanded from 6 to 43 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that Worthington materially overstated net income. This was accomplished by understating accounts payable and recording fictitious supplier credits that further reduced accounts payable. An SEC investigation was critical of the evidence gathered by Worthington's audit firm Hepple & Ramsey, in testing accounts payable and the supplier credits. The following is a description of some of the fictitious supplier credits and unrecorded amounts in accounts payable, as well as the audit procedures e. Cut-Off-Hepple & Ramsey also performed a purchases cutoff test by vouching accounts payable invoices received for nine weeks after year-end. The purpose of this test was to identify invoices received after year-end that should have been recorded in accounts payable. Thirty percent of the sample ($160,000) was found to relate to the prior year, indicating a potential unrecorded liability of approximately $500,000. The audit firm and Worthington eventually agreed on an adjustment to increase accounts payable by $260,000. Required For each of the five instances above, identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Worthington Stores. Worthington Department Stores Auditing standards require the auditor to obtain sufficient appropriate audit evidence (AS 1105.04: Audit Evidence). The audit firm of Hepple & Ramsey was investigated for the audit of Worthington. Worthington is a large discount catalog department store chain. The company recently expanded from 6 to 43 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that Worthington materially overstated net income. This was accomplished by understating accounts payable and recording fictitious supplier credits that further reduced accounts payable. An SEC investigation was critical of the evidence gathered by Worthington's audit firm Hepple & Ramsey, in testing accounts payable and the supplier credits. The following is a description of some of the fictitious supplier credits and unrecorded amounts in accounts payable, as well as the audit procedures e. Cut-Off-Hepple & Ramsey also performed a purchases cutoff test by vouching accounts payable invoices received for nine weeks after year-end. The purpose of this test was to identify invoices received after year-end that should have been recorded in accounts payable. Thirty percent of the sample ($160,000) was found to relate to the prior year, indicating a potential unrecorded liability of approximately $500,000. The audit firm and Worthington eventually agreed on an adjustment to increase accounts payable by $260,000. Required For each of the five instances above, identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Worthington Stores