Question 29. The level of uncertainty in audit evidence obtained is acceptable because:
discussion
A. In auditing, it is only necessary to collect conclusive audit evidence.
B. Audit evidence from different sources can be combined.
C. Cost of checking all items, especially checking transactions
regular generally uneconomical
D. Both B and C are correct
Question 30. Errors in asset values in the balance sheet are considered immaterial when:
A. Less than 1%
B. Under 5% C. From 5-15% D. From 15-20%
III. EXERCISES
Question 1. During the audit at Hoang Ha Company Limited, the auditor discovered a number of bookkeeping transactions in year N as follows: (Unit: 1000 VND)
STT
Economic content | Accounting entries | |
1 | On February 1, raw materials in transit from last month were imported into the warehouse. The value of raw materials at the price excluding VAT is 60,000, VAT rate is 10%, the money for purchasing raw materials has not been paid to the supplier. sell. | Debit account 152: 60,000 Debit account 133: 6,000 Credit account 331: 63,000 |
2 | On February 6, purchased a piece of machinery and equipment for the production department at a purchase price excluding VAT of 410,000, VAT rate of 10%. Payment was made to the seller by bank transfer. Knowing that this asset is invested from the development investment fund develop | Debit account 2411: 410,000 Debit account 133: 41,000 Credit account 112: 451,000 |
3 | On February 23, 2,000 products were shipped to Tien Dat Joint Stock Company for sale. The unit price of the shipment was 45/product, the selling price before VAT was 50/product, and the VAT rate was 10%. The shipping cost according to the contract that the enterprise must bear according to the total payment price was 4,400 (including VAT). VAT is 400), paid in cash. | Debit account 157: 90,000 Credit account 156: 90,000 |
4 | February 25 liquidation of a production equipment, raw materials | Debit account 214: 200,000 |
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Price 250,000, accumulated depreciation 200,000. Scrap | Debit account 811: 50,000 | |
The cash recovery is 16,800 (price includes | Credit account 211: 250,000 | |
including VAT know VAT rate | ||
5%). Liquidation costs were 1,000, paid in cash. |
Request. Please detect possible errors in transactions and adjust according to current accounting regime. State the data base affected by related items?
Question 2. When planning an audit of financial statements, auditors must understand audit risk and the types of risks that make up audit risk .
Requirement: In each of the following situations, indicate the corresponding type of risk. In
The risks listed are either single or multiple use, or non-use. Types of risks:
A. Control risk
B. Detection risk
C. Potential risks Situations:
1. The customer failed to detect the employee's fraud in time because the bank deposit account was not reconciled monthly.
2. Money is more easily stolen.
3. The auditor's confirmation letter of receivables did not detect any material misstatements.
4. Fund disbursements are not properly approved.
5. Failure to fully assign tasks.
6. Lack of necessary basic testing.
7. Scientific and technological developments make the main products of the enterprise likely to become obsolete.
8. The auditor selects a sample that is not representative of the population and concludes that the item does not contain material misstatements when in fact there are material misstatements.
Question 3. At Nam Hai Production Company Limited, the operating procedures are described as follows:
1. When ordering raw materials
, one
copy of order form
send to
manure
core
goods . When multiplying
goods , department staff
core
The row will be filled with real numbers.
core
on a copy of the order and send it to the accounting department to credit the accounts payable and
Purchase of goods and materials
then will be
enter
in the warehouse
2. The employee time cards will be sent to the computer room to prepare the payroll, paychecks and payroll expense allocation table . The paychecks will be attached to the payroll table to be presented to a person in the company management for comparison and
Sign and approve . Then the employee will be paid .
return to the distributor
machine to detect
3. One
The company 's sales office includes a
school and two
staff. Branch is available
dream
transaction account at local bank
method.
Branch receipts are deposited here. Branch withdrawal checks must be signed by the store manager or the company's financial director. The subsidiary ledger is sent to the store manager . He will compare the main ledger with the subsidiary ledger . Signature
The leader will create a
company.
statement of income and expenditure during the tax period and payment
about
Required . For each of the above situations , indicate the weaknesses of the internal control system and the types of fraud or error that could occur .
Question 4. An Binh Company has invested in renovating the Sacred Forest relic site. Due to the policy of encouraging investment in the local tourism industry, An Binh Company is exempted from all taxes and therefore is not required to use entrance tickets issued by the tax authority.
During the opening hours of the relic site, 2 staff members will be on duty at the gate to directly collect the entrance fee of 5,000 VND/person. According to the company's regulations, tour guides with a license from the Department of Tourism are exempt from the entrance fee.
At the end of the day, one of the two collectors will bring the money to Mr. Nga, the relic site manager. Mr. Nga checks the money and puts it in the safe. Every Friday, Mr. Nga and one of the employees bring the money to the bank and send the payment statement to the company.
After 1 year of operation, the director of An Binh Company realized that the relic site did not bring about the expected economic efficiency because the income was lower than the cost. One of the issues raised by the director was to improve internal control over the collection stage.
Requirement : Make a list of possible fraudulent acts and errors .
At the same time, I put forward recommendations to prevent
Question 5. The following situation:
both behaviors .
The collapse of the energy corporation Enron led to the collapse of Arthur Andersen.
1. Before falling into crisis and collapse
Founded in 1985, on the basis of the merger of two companies Houston Natural Gas and Internorth of Omaha, the name Enteron (intestine) comes from the idea that it is an indispensable part in the digestive process, Enron quickly became a powerful multinational company in the energy sector after a short period of 15 years. Enron started from nothing to become the seventh largest company in the United States and at one time the world's leading famous energy company. The company has operations in more than 30 countries.
around the world, including Vietnam. They employ more than 21,000 people and are present in more than 40 countries worldwide, including 7,500 employees working in a 50-story building in downtown Houston. A natural gas company in Omaha, Nebraska (USA) and operates 59,200 km of pipeline.
In 1989, Enron began trading natural gas. Over the years, the company became the largest pipeline and electricity trader in North America and the United Kingdom.
In 1997, the company began expanding its operations into coal, pulp and paper, plastics, metals, and telecommunications. Enron is often seen as the center of revolutions related to telecommunications, the Internet, energy deregulation, and more.
There is little to say about the rise and fall of Texas energy giant Enron. Along with producing energy, they also created a powerful brand identity. Enron won Fortune magazine’s “America’s Most Innovative Company” award for six years running, and they were also ranked highly in the magazine’s “Best Companies to Work For” chart. The company also promoted its image as a good corporate citizen, publishing social and environmental reports that focused on its operations, its environmental impact, its anti-bribery and corruption policies, and its corporate relationships.
Thanks to the new regulations that liberalized the US energy market in the 1990s, they transformed from an obscure business into a corporation that could change the balance of the energy business. The Energy Policy Act of 1992 forced small companies to open their transmission lines to Enron's distribution system. In addition, Enron made a lot of money from trading in the energy market. In reality, they were just traders arranging contracts between buyers and sellers and taking commissions. In Enron's hands, the energy market was akin to financial speculation. The company built multimillion-dollar plants around the world, but only owned them when energy prices were high, and then sold them when they were in trouble. With favorable financial operations, Enron expanded into commodities such as paper, water, plastics, metals, and telecommunications equipment.
Enron created more than 900 subsidiaries, mostly in countries with the most lenient accounting laws. The parent-subsidiary system was designed by very talented financial experts, and guaranteed by one of the world's big five auditors: Arthur Andersen.
Over the years, Enron proved to be a strong and profitable company.
High:
Enron's most notable success occurred between 1997 and 2000. During this time, Enron's stock price rose from under $20 to over $80. In 2000, Enron's market value reached $77 billion. The company's profits also increased rapidly, from $20 billion in 1997 to $101 billion in 2000, a fivefold increase in just four years, making it one of only seven U.S. companies to have sales of more than $100 billion. The media, typically Fortune magazine, consistently portrayed Enron as the company with the most potential, with a business capital of $63 billion.
From 1985 to the end of 2001, the company's stock price continued to rise. At its peak in October 2001, the company's stock price more than doubled in just one year.
As Enron grew and expanded its business, it became increasingly risky. In the pipeline business, both volume and price were stable. But in the oil and gas business, prices fluctuated greatly and volumes fluctuated due to competitive pressures.
Enron was so big that no one believed it could collapse. So why did Enron, the largest energy company in the United States and the seventh largest company in the United States, fall into crisis and bankruptcy so quickly?
2. Crisis and collapse
On January 10, the White House officially announced that Enron's leader, Kenneth Lay, had contacted senior officials of the Bush administration, including Treasury Secretary Paul O'Neil and Commerce Secretary Don Evans, to seek help and financial intervention from the government to escape the brink of bankruptcy, but was rejected by both Secretaries. At that time, O'Neil did not inform Prime Minister Bush about the Enron crisis and the government did nothing to protect Enron's employees and shareholders.
By October 2001, the US Securities and Exchange Commission had investigated Enron's accounting books and the truth began to emerge.
Arthur Andersen, the firm that audited and kept detailed records of Enron's financial activities, has admitted that it destroyed "a significant but unspecified number" of documents that revealed financial irregularities at Enron. Prosecutors said the number of documents destroyed could be in the thousands.
Many financial analysts continued to rate the company highly, right up until the time of its collapse. According to financial magazine Bloomberg Markets, by mid-October 2001, at least six prominent Wall Street analysts continued to recommend buying Enron stock.
On October 26, 2001, the company admitted for the first time that it had lost hundreds of millions of dollars in a single quarter:
Enron announced a loss of $618 million in the third quarter, but the actual loss was $1.2 billion. The hidden $1.2 billion in debt caused panic in the stock market when it was revealed.
In August 2001, CEO Jeffrey Skilling resigned for personal reasons.
In December 2001, the U.S. Securities and Exchange Commission announced that it had sued Mr. Fastow in a Washington court for failing to turn over documents related to Enron's financial irregularities and failing to appear before the commission in response to a subpoena issued on October 30. Fastow's CFO was forced to leave.
When the company was in trouble, they persuaded their employees to accept stock-based pay and bonuses. Not only did stock pay fail to make executives put shareholders first, it actually had the opposite effect—it bought their silence about the company’s financial performance. In doing so, Enron’s value was severely diminished.
There have been predictions
*) In January 2001, an Andersen auditor strongly objected to Enron's accounting methods. A few weeks later, this employee was transferred to another department by Andersen at Enron's request. An employee of Merrill Lynch (a securities rating company) rated Enron's stock as "underweight". This employee was fired shortly thereafter.
*) Enron's stock price fell dramatically: On August 15, 2001, Enron's stock price began to fall. In early November 2001, Enron's stock price fell below $10. By the end of 2001, each share was worth only $0.6.
On September 2002, the United States officially transferred Enron's case to the criminal investigation department. This investigation is expected to be directed from Washington, but will involve prosecutors from many states. Previously, Enron had undergone a series of civil investigations when it filed for bankruptcy for the second time in December 2001.
At this point, prosecutors are concerned about a potentially explosive element: Attorney General John Ashcroft on January 10 recused himself from the Justice Department's criminal investigation into Enron, after information about the $61,000 that Enron contributed to his 2000 Senate campaign was made public. The entire Houston attorney general's office, the agency assigned to investigate Enron, also withdrew from the investigation, citing "financial ties" to Enron.
On December 1, 2001, the company declared bankruptcy.
3. Cause analysis
Enron's financial mystery was the root cause of its downfall. Experts say the company's mistake was relying too much on financial transactions. According to economists, a healthy company must disclose its finances to its partners and vice versa. However, many of Enron's partners did not follow accounting principles, leaving them powerless to control their finances.
Because of accounting fees: Andersen signed a contract to advise Enron, and then acted as an auditor to certify Enron's financial statements. Consulting and auditing fees were huge. For example, in 2000, Enron Corp paid Arthur Andersen $25 million in auditing fees, $27 million in consulting and other service fees, for a total of $52 million. That means Enron Corp paid Arthur Andersen about $1 million a week.
Enron's leaders took advantage of legal loopholes to create subsidiaries without declaring their financials to hide the fact that the company had borrowed more than it could pay. In this way, Enron did not have to disclose its debts and hid its losses. As a result, Enron inflated its profits and its stock price skyrocketed. When Enron had to officially announce that it had lost over $500 million since 1997, insiders promptly reaped huge profits from the company's stocks. Specifically, Chairman and CEO Kenneth Lay held 138 million shares of the company. In early 2001, Kenneth Lay sold them for $79 a share. Most of these purchases were not announced.
Enron's financial operations were based on the design and operation of what many analysts have called "unholy alliances." A complex web of relationships between Enron, several government officials, and especially the accounting firm Arthur Andersen helped Enron. Enron's chief accountant, Richard Causey - who designed the system of deceiving shareholders - was a former auditor of Andersen.
The successive dismissal of senior company executives and some employees and the spending of hundreds of millions of dollars for officials and employees to buy stocks or securities at special prices are no less important reasons.
4. Legal liability
When Enron collapsed, it destroyed more than $60 billion in market value. Thousands of people lost their jobs and billions of dollars worth of employee retirement accounts were wiped out.
The company's profit claims were proven to be bogus, they had huge debts that were not reflected in the company's books.
More surprising are the stories of top leaders, including former Enron CFO Andrew Fastow, who "snipped" over 33 million USD from transactions and was sentenced to 10 years in prison in 2004 after being investigated.
The company collapsed with a debt of $13 billion and billions of dollars in loans, credit refinances and energy contracts. Enron declared bankruptcy, marking the largest business failure in the United States. The U.S. Department of Justice decided to investigate whether Enron officials had committed fraud before the company went bankrupt.
The records show that President George W. Bush received more than $550,000 from Enron and its associates, the largest single financial support. In return, he gave Enron significant business favors. Enron and Ken Lay, Enron's CEO, whom Bush affectionately nicknamed "Kenny Boy," donated money to Bush from his two Texas gubernatorial campaigns in 1994 and 1998 (a total of $312,500), to his presidential campaign and to his inauguration in early 2001. Lay said he supported Bush because of his longstanding relationship with the Bush family. In fact, Lay's support dates back to Bush's presidential campaign at least as far back as 1980.
Many Enron and Andersen executives are either in prison or awaiting sentencing. The main victims were the stockholders. The “insiders” sold their shares before the disaster was discovered. For most “outsiders,” the run was a disaster. Some bought shares at $90 and got $0.60 less than a year later.
Enron's bankruptcy also exposed political ties. Among them were the company's close ties to the White House. Enron had donated millions of dollars to George Bush's 2000 presidential campaign. Although Bush was a personal friend of Enron CEO Kenneth Lay, he quickly distanced himself from any potentially scandalous involvement with the company.
Enron also provided financial support to more than 250 members of Congress from both the Democratic and Republican parties from 1989 to 2001. At the top of the list of Enron recipients were Texas Senators Kay Baley Hutchinson $99,500, Republican. Texas Attorney General John Cornyn also received more than $150,000 from Enron and from figures in this corporation. In addition, at least 15 senior officials in the Bush administration until 2000 still had shares in Enron, including Secretary of Defense Donald Rumsfeld, senior advisor to the President Karl Rove, Deputy Secretary of the Treasury Peter Fisher and US Trade Representative Robert Zoellick ($50,000).