Discuss the Importance of Auditing Cash and Cash Equivalents

Length:  About One page + 1+ References, APA format,
Due Date: 3/11/2014 11:59:59 PM 

You have just finished your yearly audit of a publicly traded corporation. Describe how you would handle each of the following scenarios:

Scenario 1

Describe why there is a big emphasis placed on auditing cash and cash equivalents. Address the following:

  • Why is this area more susceptible to fraud?

Scenario 2

While doing an audit, you discover inconsistencies in the company’s expenses. Address the following:

  1. Why might a company choose to overstate or understate its expenses?
  2. How might this be accomplished?
  3. Describe how professional skepticism plays into this type of audit.

Scenario 3

Why is auditing inventory more complex than auditing other asset accounts? Address the following:

  • What are the three audit tests that can be applied to inventory, and how do the internal controls play into it?

Scenario 4

  1. When an auditor is trying to determine if the financial statements are reported fairly, how might a summary of potential adjustments help?
  2. What information would a summary of the client’s potential adjustments give to the auditor?

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