We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Audit Risk Factors Common To Family Owned Businesses Paper

Words: 492, Paragraphs: 8, Pages: 2

Paper type: Essay , Subject: Business

1. Some important audit risk factors related to family-owned businesses would be preparing the next generation of leadership, managing expenses and remaining competitive, and the fight against technological changes. To lower these risk factors, auditors should be very skeptical about their client’s intentions. For example, when a client is not willing to update their system in order to produce more accurate records.

All of these factors took a role in Fred Greenberg’s fraud; Jack’s health took a toll and he had to place his sons in charge of the company before they were ready, then the company encountered some hard times and Fred committed fraud to hide it from his family to prevent his dad’s health from deteriorating any farther, and lastly, Fred refused to use technology to help with accounting because he was trying to hide his fraud.

2. A) The Prepaid Inventory account’s audit objectives are to ensure all inventory in this account has not been received and is accounted for correctly. To do this they could have checked Form 9540-1 or called vendors to confirm inventory delivery dates or that inventory hadn’t been delivered yet.

B) The Merchandise Inventory account’s audit objective would be to ensure the amount of inventory listed on the balance sheet is the correct amount. To do this they could complete a physical count.

Jack Greenberg Inc

Don't use plagiarized sources. Get Your Custom Essay on Audit Risk Factors Common To Family Owned Businesses
Just from $13,9/Page

Get Essay

3. It was a poor choice to rely heavily on JGI’s delivery receipts when auditing the company’s prepaid inventory because they were prepared internally. A better procedure would have been to audit the prepaid inventory account based off Form 9540-1. Documents that are prepared internally have a higher chance of being falsified compared to externally prepared client documents.

4. A walk-through test that is used during an audit shows the path a transaction takes through the accounting system from start to finish to get an understanding for how reliable the company’s accounting system is. According to PCAOB Auditing Standard No. 2 Appendix E Number 57, performing “walkthroughs” are not optional under the standard’s directions.

5. One audit procedure that could have helped Grant Thornton discover fraud with JGI’s delivery receipts would have been confirmation. If Thornton’s associates called all the vendors that sold JGI inventory on their prepaid inventory list and asked if the inventory had been delivered yet, they would have found out that some of the inventory in the prepaid inventory account was also in merchandise inventory account. Another procedure that could have helped catch the fraud would be inspecting internal and external documents and comparing them to each other.

6. Once an audit firm informs client management of important internal control weaknesses, I don’t believe the audit firm has a responsibility to insist that client management correct the problems unless it is preventing the auditor from getting the necessary information needed to perform the audit. It’s the auditor’s duty to ensure that financial data is reported correctly with the standards, not to set up internal controls.

About the author

This paper is written by Sebastian He is a student at the University of Pennsylvania, Philadelphia, PA; his major is Business. All the content of this paper is his perspective on Audit Risk Factors Common To Family Owned Businesses and should be used only as a possible source of ideas.

Sebastian other papers:

How to cite this page

Choose cite format:

Audit Risk Factors Common To Family Owned Businesses. (2019, Dec 05). Retrieved from https://paperap.com/paper-on-jack-greenberg-inc/

Is Your Deadline Too Short?
Let Professionals Help You

Get Help

Our customer support team is available Monday-Friday 9am-5pm EST. If you contact us after hours, we'll get back to you in 24 hours or less.

By clicking "Send Message", you agree to our terms of service and privacy policy. We'll occasionally send you account related and promo emails.
No results found for “ image
Try Our service

Hi, I am Colleen from Paperap.

Hi there, would you like to get such a paper? How about receiving a customized one? Click to learn more https://goo.gl/CYf83b