Case Study Conflicting ClientsTopic Auditing (Confidential.docx

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Case Study: Conflicting Clients Topic: Auditing (Confidentiality, Misrepresentation of Facts) People Involved: Jennifer Grace, First year member of her CPA firm’s management group Tom Ward, CFO of Fantastic Developments, Inc., a client While reviewing the current-year audit working papers of Coshocton National Bank (CNB), the engagement manager, Jennifer Grace, noted something curious. In the working papers related to loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been randomly selected for confirmation but that Fantastic had not responded to either the initial or second confirmation request. The audit staff disposed of this “loose end” by alternate procedures: examining cash collections (which had become somewhat sporadic) and vouching to underlying loan documentation, including a set of recent (unaudited) financial statements that showed Fantastic’s solid financial position and operating profitability. Jennifer noted this reference to Fantastic Developments because this private company was also a client of her firm. In fact, Jennifer had served as the audit senior on the prior-year audit of Fantastic. She knew that the company had been struggling for a couple of years and had experienced recurring operating losses. Her knowledge of Fantastic did not reconcile with the discussion in the audit working papers related to the financial statements furnished to the bank. When Jennifer contacted Fantastic’s CFO, Tom Ward, and inquired about the company’s apparently miraculous turnaround, he was noncommittal and unhelpful. Tom replied that business had picked up. He apologized for not calling Jennifer’s firm himself because he had been so busy, and then he told her that Fantastic had decided to engage another CPA firm for its accounting and auditing needs. Although confused, Jennifer obviously couldn’t reject the possibility that this abrupt dismissal was a direct consequence of her inquiry. As a result, Jennifer wonders whether the financial statements which Fantastic furnished to the bank as a basis for a loan application are fraudulent. The bank apparently has no such suspicion, however. _______________________________________________ Use the Instructions for Case Analyses to craft a response to this case, articulating the main issues and ethical dilemma. Review the assessment criteria below before you begin writing. Submit a written paper which is 2-3-pages in length exclusive of reference page and that is double-spaced. You should cite relevant resources in APA format. Papers will be assessed using the following criteria: The Written assignment: identifies all the relevant facts of the case articulates overarching ethical issues including the extent of Jennifer's responsibility to take action; how the interests of the firm (and stockholders) can be balanced against the environmental interests; what obligation the company has to future generations and citizens. identifies all stake.

statements furnished to the bank.
When Jennifer contacted Fantastic’s CFO, Tom Ward, and
inquired about the company’s apparently miraculous
turnaround, he was noncommittal and unhelpful. Tom replied
that business had picked up. He apologized for not calling
Jennifer’s firm himself because he had been so busy, and then
he told her that Fantastic had decided to engage another CPA
firm for its accounting and auditing needs. Although confused,
Jennifer obviously couldn’t reject the possibility that this abrupt
dismissal was a direct consequence of her inquiry.
As a result, Jennifer wonders whether the financial statements
which Fantastic furnished to the bank as a basis for a loan
application are fraudulent. The bank apparently has no such
suspicion, however.
_______________________________________________
Use the
Instructions for Case Analyses
to craft a response to this case, articulating the main issues and
ethical dilemma. Review the assessment criteria below before
you begin writing.
Submit a written paper which is 2-3-pages in length exclusive
of reference page and that is double-spaced. You should cite
relevant resources in APA format.
Papers will be assessed using the following criteria:
The Written assignment:
identifies all the relevant facts of the case

articulates overarching ethical issues including the extent of
Jennifer's responsibility to take action; how the interests of the
firm (and stockholders) can be balanced against the
environmental interests; what obligation the company has to
future generations and citizens.
identifies all stakeholders
poses possible alternatives and ethics of each alternative. Paper
should explore the possible alternatives and ethics from the
Utilitarian Perspective, the Rights Perspective,
or
the Justice Perspective
identifies all practical constraints
recommends a specific action Jennifer should take
is of high quality, writing is clear and professional
conforms to the structural requirements including APA style
guidelines for References.

PLEASE ALWAYS INCLUDE CONCLUSION AT THE END OF EACH WRITTEN ASSIGNMENT,AND AT LEAST 3 REFERENCES. CITE YOUR SOURCES AND DO NOT COPY PASTE FROM THE INTERNET, OUR UNIVERSITY USE TURNITIN AS WELL AS CHECKS EVERY ASSIGNMENTS THROUGH DIFFERENT PLAGIARISM PROGRAMS. 1. Case Study: Conflicting Clients Topic: Auditing (Confidentiality, Misrepresentation of Facts) People Involved: · Jennifer Grace, First year member of her CPA firm’s management group · Tom Ward, CFO of Fantastic Developments, Inc., a client While reviewing the current-year audit working papers of Coshocton National Bank (CNB), the engagement manager, Jennifer Grace, noted something curious. In the working papers related to loan valuation, Jennifer saw that the commercial loan of Fantastic Developments had been randomly selected for confirmation but that Fantastic had not responded to either the initial or second confirmation request. The audit staff disposed of this “loose end” by alternate procedures: examining cash collections (which had become somewhat sporadic) and vouching to underlying loan documentation, including a set of recent (unaudited) financial statements that showed Fantastic’s solid financial position and operating profitability. Jennifer noted this reference to Fantastic Developments because this private company was also a client of her firm. In fact, Jennifer had served as the audit senior on the prior-year audit of Fantastic. She knew that the company had been struggling for a couple of years and had experienced recurring operating losses. Her knowledge of Fantastic did not reconcile with the discussion in the audit working papers related to the financial statements furnished to the bank. When Jennifer contacted Fantastic’s CFO, Tom Ward, and inquired about the company’s apparently miraculous turnaround, he was noncommittal and unhelpful. Tom replied that business had picked up. He apologized for not calling Jennifer’s firm himself because he had been so busy, and then he told her that Fantastic had decided to engage another CPA firm for its accounting and auditing needs. Although confused, Jennifer obviously couldn’t reject the possibility that this abrupt dismissal was a direct consequence of her inquiry. As a result, Jennifer wonders whether the financial statements which Fantastic furnished to the bank as a basis for a loan application are fraudulent. The bank apparently has no such suspicion, however. _______________________________________________ Use the Instructionsfor Case Analyses to craft a response to this case, articulating the main issues and ethical dilemma. Review the assessment criteria below before you begin writing. Submit a written paper which is 2-3 pages in length exclusive of reference page and that is double-spaced. You should cite relevant resources in APA format. Papers will be assessed using the following criteria: The Written assignment: · identifies all the relevant facts of the case · articulates overarching et.

Week 3 Homework Questions1)The following questions are based.docx

co4spmeley

Week 3 Homework Questions 1) The following questions are based on the same scenario I used for question 3 in your week 1 homework. That question addressed violations of the Code of Conduct. I want to apply the same scenario to legal liabilities. Here is a copy of the scenario: John Smith owns a small, privately held firm. He hired you to audit its financial statements. He told you that the audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. You immediately accepted the engagement and agreed to provide an auditor's report within three weeks. John agreed to pay you a fixed fee plus a bonus if the loan was granted. You hired two accounting students to conduct the audit and spent several hours telling them exactly what to do. You told the students not to spend time reviewing John's internal controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and on summarizing the data in the accounting records that support John's financial statements. The students followed your instructions and, after two weeks, gave you the financial statements, which did not include footnotes. You studied the statements and prepared an unqualified auditor's report. The report, however, did not refer to generally accepted accounting principles or to the fact that John had changed to the accounting standard for capitalized interest. Here are the new questions: a) After the audit was completed, John used the financial statements to secure a loan from a bank. Within a year, John was unable to make payments on the loan. In the process of investigating the reason why, the bank determined that the financial statements were material misstated. John, however, was near bankruptcy and could not pay off the loan. The bank sued you for the balance due on the loan. Given the violations I discussed in my solution to the week 1 homework, do you think the bank will prevail? You answer should provide an analysis of the legal issues involved to include what basis the bank would have to sue, what you level of liability would be(proportionate or joint and several), and a clear statement of why or why not you think the bank would prevail to include how effective your defenses might be. b) Now assume that instead of applying for a bank loan, you knew that John was planning to use the financial statements as part of a prospectus for an initial public stock offering (IPO), i.e., John's firm sold stock directly to the public. John did and a potential investor read the prospectus and did a comprehensive analysis of the financial statements as a basis for his decision to buy a significant portion of stock in the new corporation. A year later, the firm was doing so badly that its stock price was down to 10% of what it was after the IPO. The investor sued both the John' s new corporation and you for his investment losses. During the trial, the investor was able to show.

Case - The Greater Providence Deposit & Trust EmbezzlementNino M.docx

tidwellveronique

Case - The Greater Providence Deposit & Trust Embezzlement Nino Moscardi, president of Greater Providence Deposit & Trust ( GPD& T), received an anonymous note in his mail stat-ing that a bank employee was making bogus loans. Moscardi asked the bank’s internal auditors to investigate the transac-tions detailed in the note. The investigation led to James Guisti, manager of a North Providence branch office and a trusted 14- year employee who had once worked as one of the bank’s internal auditors. Guisti was charged with embezzling $ 1.83 million from the bank using 67 phony loans taken out over a three- year period. Court documents revealed that the bogus loans were 90- day notes requiring no collateral and ranging in amount from $ 10,000 to $ 63,500. Guisti originated the loans; when each one matured, he would take out a new loan, or rewrite the old one, to pay the principal and interest due. Some loans had been rewritten five or six times. The 67 loans were taken out by Guisti in five names, includ-ing his wife’s maiden name, his father’s name, and the names of two friends. These people denied receiving stolen funds or know-ing anything about the embezzlement. The fifth name was James Vanesse, who police said did not exist. The Social Security num-ber on Vanesse’s loan application was issued to a female, and the phone number belonged to a North Providence auto dealer. Lucy Fraioli, a customer service representative who cosigned the checks, said Guisti was her supervisor and she thought nothing was wrong with the checks, though she did not know any of the people. Marcia Perfetto, head teller, told police she cashed checks for Guisti made out to four of the five persons. Asked whether she gave the money to Guisti when he gave her checks to cash, she answered, “Not all of the time,” though she could not recall ever having given the money directly to any of the four, whom she did not know. Guisti was authorized to make consumer loans up to a cer-tain dollar limit without loan committee approvals, which is a standard industry practice. Guisti’s original lending limit was $ 10,000, the amount of his first fraudulent loan. The dollar limit was later increased to $ 15,000 and then increased again to $ 25,000. Some of the loans, including the one for $ 63,500, far exceeded his lending limit. In addition, all loan applica-tions should have been accompanied by the applicant’s credit history report, purchased from an independent credit rating firm. The loan taken out in the fictitious name would not have had a credit report and should have been flagged by a loan review clerk at the bank’s headquarters. News reports raised questions about why the fraud was not detected earlier. State regulators and the bank’s internal audi-tors failed to detect the fraud. Several reasons were given for the failure to find the fraud earlier. First, in checking for bad loans, bank auditors do not examine all loans and generally focus on loans much larger than the ones in qu ...

CASE 3.3 The Anonymous CallerRecognizing It’s a Fraud and Evalua.docx

wendolynhalbert

CASE 3.3 The Anonymous Caller Recognizing It’s a Fraud and Evaluating What to Do Mark S. Beasley • Frank A. Buckless • Steven M. Glover • Douglas F. Prawitt LEARNING OBJECTIVES After completing and discussing this case you should be able to [1] Appreciate real-world pressures for meeting financial expectations [2] Distinguish financial statement fraud from aggressive accounting [3] Identify alternative actions when confronted with suspected financial statement fraud [4] Develop arguments to resist or prevent inappropriate accounting techniques BACKGROUND It was 9:30 a.m. on a Monday morning when the call came through. “Hi Dr. Mitchell, do you have a minute?” “Sure,” the professor replied. “I am one of your former students, but if you don’t mind, I would prefer to remain anonymous. I think it is best for both of us if I not reveal my name or company to you. I am concerned that the senior executives of the company where I serve as controller just provided our local bank fraudulently misstated financial statements. I need some fast advice about what to do. Currently, I am on my cell phone and need help evaluating my next step before I head to my office this morning. May I briefly describe what’s going on and get some input from you?” she asked. “Go ahead, let me see if there is some way I can help,” responded Dr. Mitchell. “I am the controller of a privately-held, small, start-up company that I joined three and onehalf months ago. On Friday of last week, the company’s chief executive officer (CEO), the vice president of operations, and the chief financial officer (CFO) met with representatives of the bank that funds the company’s line of credit. One of the purposes of the meeting was to provide our most recent quarterly financial statements. The company is experiencing a severe cash shortage, and the bank recently halted funding the line of credit until we could present our most recent operating results. It was at that meeting, just three days ago, that our senior executive team knowingly submitted financial statements to the bank that overstated sales and receivables accounts.” “Earlier on Friday, prior to the bank meeting, I vehemently refused to sign the commitment letter required by the bank because of my concerns about the inclusion of sales transactions to customers on account that I knew did not meet revenue recognition criteria specified by GAAP. I explained to the CEO and CFO that I believed including those transactions in the quarterly results would constitute fraud. They continued to insist that the financial statements needed to reflect the transactions, because without them, the bank would not continue funding the line of credit. They accused me of living in an “ivory tower” and emphasized that companies booked these kinds of transactions all the time. Although they acted like they appreciated my desires for perfection and exactness, they made me feel like it was my lack of experience in the real world that ...

When reviewing a balance sheet of a corporation- what are things or it.docx

jbarbara1

When reviewing a balance sheet of a corporation, what are things or items that indicate a company is in good financial health? What items indicate poor financial health? How can these concepts be applied to a personal financial statement? If your a banker reviewing a loan application, what types of items you might see on a personal financial statement sheet that would make an applicant look like a good or bad prospect for a loan? Solution Answer: Items in Balance sheet that indicate a company is in good financial health: 1. Current Assets are more than Current LIabilties 2. Long term debts are less as compared to short term. 3. Company has sufficient resrves and surplus. 4. Interneally generated funds are more than external funds. 5. Compnay has sufficient liquid assets to pay current liabilities. Items in Balance sheet that indicate a company is in poor financial health: 1. Current Assets are Less than Current LIabilties 2. Long term debts are more as compared to short term. 3. Company has insufficient resrves and surplus. 3. Interneally generated funds are less than external funds. 4. Compnay does not have sufficient liquid assets to pay current liabilities. Above cocepts/ criterias can also be applied to evalulate the personal financial statement. Being a banker we would like to evalualte the credit worthiness of the loan applicant. Personal financial statement can show the liquiduty position of the person and fixed assets heelpd by him which shall give security to the bank. More long term liabilties means lesser capacity ot pay the debt. hence the bank looks for the current assets ratio and liquidy ratio of the person / firm. it shows the debt repayment capacity of the person. .

investigation

Sonali Kukreja

The document provides guidance on conducting investigations for various parties in business transactions. It outlines the key points an investigator should focus on when investigating a client's accounts on behalf of a bank loan application. These include verifying liabilities, assets, profits, competition, and financial position. It also describes investigating accounts when a client intends to join an established business or when investigating on behalf of a purchaser, incoming partner, or lender of money. The investigator should examine factors like business trends, securities, use of funds, and reputation.

investigation

Sonali Kukreja

The document provides guidance on conducting investigations for various parties in business transactions. It outlines the key points an investigator should focus on when investigating a client's accounts on behalf of a bank loan application. These include verifying liabilities, assets, profits, competition, and financial position. It also describes investigating accounts when a client intends to join an established business or when investigating on behalf of a partner or share purchaser. The investigator should examine financial records, contracts, reputation, security, and use of funds/capital. The goal is to accurately assess the financial health, risks, and viability of the business or investment opportunity.

Midterm Exam Fall 2015ACCT 612 – AuditingInstructionsAft.docx

annandleola

Midterm Exam Fall 2015 ACCT 612 – Auditing Instructions After you have downloaded this document from the Midterm Exam Assignment, please save a copy of this document and rename it using your own name as the file name so that I can keep them separate on my machine (i.e., "Jim Peters Mid.doc"). Type all your answers in this document. Once you have completed the exam, submit your completed Word files by attaching them to the Midterm assignment in LEO by midnight, November 1st. I will assess a 5% per day late penalty for late exams. If you need clarification on the wording of any question on the exam, you can e-mail me or call me at the phone numbers listed in my contact information. I will not accept direct quotes in your answers. If you use outside sources, you need to paraphrase the material in your own words. I will deduct points for not following these instructions. For example, I will deduct points if you do not type your answers in this document and submit some other type of file; if you do not attached your file to the assignment; or if you do not rename your file as instructed above. I have posted a spreadsheet file, which I refer to as a grading checklist, with this exam. That spreadsheet file shows you how I have allocated points to questions. When grading your exams, I will fill in a copy of this file for each student and return it with your graded exam. When I grade exams, I embed comments in the Word documents to explain why I am deducting points. Course Policy on Collaboration and Individual Work This exam is an individual assignment. You are not to discuss it with anyone other than myself. It is also open book and open note. However, it is not a research assignment and I want you to base your answers to the questions on the material I have included in the exam, the text for the course, and the materials I have handed out in class. Questions None of these questions has a style component, thus you don't have to write in complete sentences and well-formed paragraphs. You can use lists where appropriate if you want. You are a partner in a medium-sized, regional CPA firm and have been approached by XYZ, Inc., a relatively small, public company, to do their audit for next year. XYZ is registered with the SEC and has filed audited 10-Ks for the last 10 years since they went public. They haven't indicated why they are switching auditors. XYZ specializes in developing shale gas using fracking technology. Fracking technology involves drilling wells into shale formations and injecting high pressure water containing special chemicals into the well to fracture the shale formation and release the trapped natural gas. You and your firm currently are members of the AICPA. All the partners and managers are licensed CPAs in the state of New Mexico and also members of the AICPA. Your firm has limited experience with oil and gas extraction and has no other fracking clients. However, your firm has offices that ...

The document provides guidance on conducting investigations for various parties in business transactions. It outlines the key points an investigator should focus on when investigating a client's accounts on behalf of a bank loan application. These include verifying liabilities, assets, profits, competition, and financial position. It also describes investigating accounts when a client intends to join an established business or when investigating on behalf of a partner or share purchaser. The investigator should examine financial records, contracts, reputation, security, and use of funds/capital. The goal is to accurately assess the financial health, risks, and viability of the business or investment opportunity.

Midterm Exam Fall 2015ACCT 612 – AuditingInstructionsAft.docx

annandleola

ProfessorLance

The document provides an overview of the course material for ACC 410 Entire Course Material- Auditing. It includes 14 discussion questions and assignments covering topics such as: - The differences between internal and external audit staff relationships with a company. - Conditions under which different types of audit reports may be issued, such as unmodified or qualified reports. - Cases involving compliance with generally accepted auditing standards and procedures for topics like analytical procedures, internal controls, audit programs, and ethics. The material asks students to evaluate statements, analyze case studies, describe audit processes, and discuss standards in order to demonstrate understanding of fundamental auditing concepts. Students are also instructed to respond to classmates' postings on the various discussion

Ebook1ntrgudprimer2015 2

Greg Washington

The document provides guidance to entrepreneurs on obtaining capital from banks. It discusses how banks review loan requests and what information they require, including business and personal financial statements. It emphasizes the importance of being an "offensive borrower" by regularly reviewing financials and tax filings, and establishing banking relationships before needing funds. The document compares cash-based and accrual-based accounting and advises entrepreneurs to provide accrual-based financial statements when requesting loans.