Auditing: A Risk Based-Approach to Conducting a Quality Audit
10th Edition
ISBN: 9781305080577
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: South-Western College Pub
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Chapter 6, Problem 72FF
a.
To determine
Introduction:
To describe: The audit procedures and audit evidence which can detect the misstatements identified in report of SEC.
b.
To determine
Introduction: Auditor’s assessment of management’s integrity has an inverse relationship with the quantity and quality of audit procedures performed by the auditor.
To describe:Impact of auditor’s assessment of management’s integrity on audit procedures and role of professional skepticism.
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The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. In the fourth quarter of FY 1999, Rite Aid prematurely recognized $17 million relating to a litigation settlement with a vendor. Rite Aid should not have recognized this sum in that period because the settlement offer was expressly contingent upon the execution of a formal settlement agreement which did not take place until May 20, 1999. Moreover, the litigation settlement was also contingent upon the execution of a purchasing agreement that was not finalized until May 18, 1999. Both of these contingencies were expressly stated in the February 26, 1999 letter of intent signed by Grass.
The following paragraphs describe fraudulent accounting committed by the company Rite-Aid in 1999. After reading the paragraphs, list the journal entries you think Rite-Aid would have used to do what is described here. You will have to make an educated guess as to what journal entries the company would use to cover up the fraud. Rite Aid failed to record an accrued expense for stock appreciation rights it had granted to employees, in a program that gave the recipients the right to receive cash or stock in amounts tied to increases in the market price of Rite Aid stock. Rite Aid should have accrued an expense of $22 million in FY 1998 and $33 million in FY 1999 for these obligations.
Chapter 6 Solutions
Auditing: A Risk Based-Approach to Conducting a Quality Audit
Ch. 6 - Prob. 1TFQCh. 6 - Prob. 2TFQCh. 6 - Prob. 3TFQCh. 6 - Prob. 4TFQCh. 6 - Prob. 5TFQCh. 6 - Prob. 6TFQCh. 6 - Prob. 7TFQCh. 6 - Prob. 8TFQCh. 6 - Prob. 9TFQCh. 6 - Prob. 10TFQ
Ch. 6 - Prob. 11TFQCh. 6 - Prob. 12TFQCh. 6 - Prob. 13TFQCh. 6 - Prob. 14TFQCh. 6 - Prob. 15TFQCh. 6 - Prob. 16TFQCh. 6 - Prob. 17TFQCh. 6 - Prob. 18TFQCh. 6 - Prob. 19TFQCh. 6 - Prob. 20TFQCh. 6 - Prob. 21MCQCh. 6 - Prob. 22MCQCh. 6 - Prob. 23MCQCh. 6 - Prob. 24MCQCh. 6 - Prob. 25MCQCh. 6 - Prob. 26MCQCh. 6 - Prob. 27MCQCh. 6 - Prob. 28MCQCh. 6 - Prob. 29MCQCh. 6 - Prob. 30MCQCh. 6 - Prob. 31MCQCh. 6 - Prob. 32MCQCh. 6 - Prob. 33MCQCh. 6 - Prob. 34MCQCh. 6 - Prob. 35MCQCh. 6 - Prob. 36MCQCh. 6 - Prob. 37MCQCh. 6 - Prob. 38MCQCh. 6 - Prob. 39MCQCh. 6 - Prob. 40MCQCh. 6 - Prob. 41RSCQCh. 6 - Prob. 42RSCQCh. 6 - Prob. 43RSCQCh. 6 - Prob. 44RSCQCh. 6 - Refer to Exhibit 6.2 and describe the differences...Ch. 6 - Prob. 46RSCQCh. 6 - Prob. 48RSCQCh. 6 - Prob. 49RSCQCh. 6 - Prob. 50RSCQCh. 6 - Prob. 51RSCQCh. 6 - Prob. 52RSCQCh. 6 - Prob. 53RSCQCh. 6 - Indicate how the auditor could use substantive...Ch. 6 - Prob. 55RSCQCh. 6 - Prob. 56RSCQCh. 6 - Prob. 57RSCQCh. 6 - Prob. 58RSCQCh. 6 - Prob. 59RSCQCh. 6 - Prob. 60RSCQCh. 6 - Prob. 61RSCQCh. 6 - Prob. 62RSCQCh. 6 - Prob. 63RSCQCh. 6 - Prob. 64RSCQCh. 6 - Prob. 65RSCQCh. 6 - Prob. 66RSCQCh. 6 - Prob. 67RSCQCh. 6 - Prob. 68RSCQCh. 6 - Prob. 69FFCh. 6 - Prob. 70FFCh. 6 - Prob. 71FFCh. 6 - Prob. 72FFCh. 6 - MINISCRIBE (LO 1, 2) As reported in the Wall...
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