Jack Greenberg inc Case Study

Document Type:Coursework

Subject Area:Accounting

Document 1

Control risk refers to a chance for financial misstatements that arise mainly out of lacking a sufficient internal controls or systems. The possibility for wrangling for the family businesses, can cause the members to seek to avoid controls as means of dealing with the family conflicts. The family members may not be having the substantial skills to execute their responsibilities properly (Knapp, 2015). Proper control systems may not be possible due to limited resources. In addition, inherent risk is the risk of a business financial fraud or misstatement beyond the related controls. For the merchandise inventory account, adding to the confirmation of the actual merchandise inventory, the auditors also needed to emphasize on the condition of the merchandise since it is perishable, whether the entire inventory was valued properly and there were proper allowances for spoilage.

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Q#3 Grant Thornton recognized prepaid inventory was actually the biggest asset and went ahead to allocated unbalanced audit resources to the audit the area. Nevertheless, they did not put into consideration the reliability and relevance of that information that was collected to be the audit evidence (Beasley, 2016). They depended so much on the JGI’s receipts of delivery that had been manipulated. Grant Thornton would justify that there was segregation of duties between the accounting and the receiving section. Collect delivery receipts samples throughout the year and make a comparison at the end of the year to the books of the client and the log of the prepaid inventory (Knapp, 2015). The importance here is collecting data outside the formal period of auditing and get to compare with later period.

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