Huffman & Whitman (H& W), a large regional accounting firm, was engaged by Ritter Tire Wholesale Company
Question:
Unfortunately, H& W did not discover the fact that Lock was involved in a fraudulent scheme in which he diverted shipments of tires to a warehouse leased in his name and sent the invoices to Ritter for payment. He then sold the tires for his own profit. Internal auditors discovered the scheme during a study of slow- moving inventory items. Ritter’s inventory was overstated by about $ 500,000 (20 percent), the amount Lock had diverted.
Required:
a. Do you believe Huffman & Whitman has any further audit responsibility with respect to the missing receiving reports? Explain.
b. Do you believe Huffman & Whitman failed to exercise the appropriate level of professional care? Why or why not?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Auditing and Assurance Services
ISBN: 978-0077862343
6th edition
Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Straws
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