Question

"Accounting Irregularities"  Please respond to the following:

• Imagine that you were auditing accounts receivable balances to confirm sales and found significant discrepancies between the recorded account balances and returned confirmations from customers. Recommend an alternative approach to confirming sales revenue. Provide rationale for your recommendation.
• Using the case as a reference and from the e-Activity, discuss the improper recognition treatment you researched, and make a recommendation regarding the type of analytical procedure that should have detected the improper accounting transactions. Propose the internal control activities or audit plan that might have detected the improper transactions. Be specific with your recommendation.

Answer 1

Answer:

Auditing:

Recommendations of alternative way to deal with affirmations

Vouch receivable to the shipping records. This will portray some bizarre deals that are recorded in the books of the business. Vouching will accordingly affirm the deviation of that are sales income.

Accommodate or reconcile the sub records to the control account. Reconciling these records or accounts must have a predictable data that will concur with each other.

Take sales cut off and decide the periods where the accounting records are set in the accounts. All exchanges or transactions must be recorded in its particular accounting periods.

Take the transportation or shipping documents, for example, the invoices and decide if they are recorded properly.

Peruse the footnotes that have been given by the administration and mind the consistency of the data. The divulgences or disclosures that are made ought to give reliable data to all the periods.

At last, utilize the analytical procedures so as to think about the present budgets and the earlier periods. The deviations that are recorded will be analyzed in detail so as to clarify adequately the reason for the deviations.

The Rise and Fall of Enron:

Enron was accepted to be a standout amongst other performing organization in the market by 2001 with its shares exchanging for $126. Its long haul inspector Andersen made an oversight in the announcing structure of Enron. The firm didn't have a corporate culture that supported legit accounting practice. This empowered the supervisors to effectively defy the reporting guidelines. Poor partition of obligations in the association bothered the issue further. Enron utilized a significant part of the specific reason vehicles that were not detailed to be balance sheet. This increased the degree of obligation or debt in the firm that could prompt losses over the long run.

The mistake that Andersen the auditor is to make a presumption that Enron the executives was straightforward and had the most significant level of honesty. This was an oversight that could later prompt the fall of the two organizations. The SAS 99 necessitates that auditors must have proficient skepticism in their expert audits. The deceptive of the Enron in the administration plunged the speculators into a stun since 1929.

Analytical procedures

Substantive Tests

This is a technique that could assist the auditor with determining the degree of material statement that is in the association. For instance the exceptional vehicles that was utilized by Enron the executives could have been recognized effectively utilizing the substantive tests. The data that was given by the administration in the budget report or financial statement couldn't be followed to their sources. This could have been resolved by utilization of substantive tests.

Recommendation:

Internal control activities

i) Isolation of activities or segregation of activities:

There was poor segregation of activities in the association. This permitted the administrators of Enron to hold an excess of dynamic decision making in all degrees of activity. Along these lines, segregating of activities would confine the level where the administration would control the data that is contained in the accounts.

ii) Test of Controls

The administration adoption and adherence to high moral standards and solid controls assumes critical  jobs in all associations. The internal controls of Enron has been powerless to such an extent that couldn't bolster the administration genuineness. Andersen ought to in this way have tried on the internal controls of Enron.