Answered step by step
Verified Expert Solution
Question
1 Approved Answer
PARMALAT LO 8 As an example of difficulties that auditors experience in collecting confirmations of cash balances, consider the Parmalat fraud that was exposed in
PARMALAT LO 8 As an example of difficulties that auditors experience in collecting confirmations of cash balances, consider the Parmalat fraud that was exposed in 2003. In that case, the company overstated cash by about $5 billion, which reflected a fictitious amount in a Bank of America account in the Cayman Islands. The Italian segment of the audit firm, Grant Thornton, received a cash confirmation that noted no exceptions to the confirmation the audit firm had sent. Parmalat accomplished the deception, in part, by providing the audit firm with a fictitious bank mailing address. a What role does the concept of materiality play in the substantive testing of cash balances? b. How might online resources and associated electronic confirmation processes help to avoid fraud associated with cash confirmations? c. What are two or three key factors the auditor might consider that could have indicated that the cash account was a high-risk account for this client and would require more skeptical audit work
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started