Case 2.1 1. Family owned businesses are at higher risk for fraud and or misstatement due to the fact that many have trouble keeping up with technology, developing efficient and effective accounting processes, and maintaining their business profits. Also family owned businesses sometimes fail to create proper separation of duties due to the trust of family members. There is also the fact that when fraud takes place family members do not act on it because of their loyalty to family. Auditors could suggest a better separation of duties, bringing in of outside accountants and managers. Also auditors should be well prepared in knowing which documents apply to, and are available for a particular business. 2. Prepaid inventory account- to verify and match all documents pertaining to prepaid inventory.
Merchandise inventory – to distinguish which inventories in merchandise might have been included in prepaid inventory and double counted. 3. Grant thornton should have requested more documentation from the vendors rather than directly from JGI. Internally prepared audit evidence is less reliable that that from outside sources. 4. Testing the step by step procedures of a company first hand to evaluate their reliability. It is not required by GAAS 5. Obtaining documentation from outside sources, recalculation, questioning of the companies accountant Cohn 6. The auditors have no responsibility beyond bringing potential weaknesses to the companies attention.
Lakeside introductory case 1. Partner- is responsible for working with a