Lehman’s net leverage ratio was not reported within the company’s audited financial statements but rather in the company’s financial highlights table and MD&A section of its annual report. What responsibility, if any, do auditors have to assess the material accuracy of financial data included in those two sections of a client’s annual report?
Answer to relevant QuestionsThe Repo 105 transactions reduced Lehman’s net leverage ratio from 17.8 to 16.1 at the end of fiscal 2007. Do you believe that was a “material difference”? Why or why not?Just for Feet operated in an extremely competitive industry, or sub industry. Identify inherent risk factors common to businesses facing such competitive conditions. How should these risks affect the audit planning decisions ...Should the results of inconclusive audit tests be included in audit work-papers? Defend your answer.Should auditors evaluate the soundness of a client’s business model? Defend your answer.Professional standards require auditors to consider a client’s “control environment.” Define control environment. What weaknesses, if any, were evident in Lincoln’s control environment?
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