Your team was assigned to conduct financial audit of Apps.com, Inc. for the year ended 2019. The
Question:
Your team was assigned to conduct financial audit of Apps.com, Inc. for the year ended 2019. The results of vertical and horizontal analyses of financial statements for the two-year periods ended 2018 and 2019 showed a significant decrease in notes payable. However, there was no payment of long-term debt reflected in cash flow statement.
When asked by the audit team, the chief financial officer claimed that the subject debt was forgiven by the creditor-bank and even provided the condonation letter.
Questions:
1. If you are the auditor, would you accept the justification of the chief financial officer that subject debt was already condoned? Why or why not?
2. What specific audit procedures/substantive tests you will perform to determine if fraud does exists? Give at least five.
Principles of Managerial Finance
ISBN: 978-1408271582
Arab World Edition
Authors: Lawrence J. Gitman, Chad J. Zutter, Wajeeh Elali, Amer Al Roubaix