Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

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Answer 3

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

Expert Solution & Answer

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

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Answer 5

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

Answer 6

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

Answer 7

Chapter 12, Problem 36P

To determine

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

Answer 8

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Answer 9

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Answer 11

Ch. 12 - Prob. 1RQ Ch. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQ Ch. 12 - Prob. 5RQ Ch. 12 - Prob. 6RQ Ch. 12 - Prob. 7RQ Ch. 12 - Prob. 8RQ Ch. 12 - Prob. 9RQ Ch. 12 - When perpetual inventory records are maintained,...

Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

Solution Summary: The author identifies the type of misstatement (error or fraud) and the substantive procedure that the auditor should use to detect it.

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Identify the type of misstatement (error or fraud), type of control that should be considered and the substantive procedure that the auditor should use to detect the misstatement.

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