Audit Evidence of Grande Store Case
Nancy Johnson
Rasmussen College
Author Note This paper is being submitted on January 23, 2015, for Gary Rosner, A340 Advanced Auditing Concepts and Standards course.
Audit Evidence of Grande Store Case When it came to the audit of the Grande Store there was insufficient numbers (four out of 1,100) to be an exact for the confirmations that were made regarding what was spent by McClure Advertising Credits. With 114 pages, 1,100 vendors and $300,000 at least 1% should have been audited for each vendor. Getting information to confirm by an outsider who has the qualifications is reliable and acceptable but it should be in written form. The auditors of Grande Store used the phone. This alternative procedure might be acceptable but it should never be used. The auditors felt the differences in the audit were immaterial, but the auditors should have went further and found out the reason for these differences. If the auditors had kept track of the differences they might have found that there were many errors this causing them to find the reason why there were so many differences (Arens, Elder, & Beasley, 2012, pp. 175-206).
When it came to testing the ad’s the auditors should never rely on just internal documentation. By trusting the internal documentation they did not have sufficient enough evidence to support the credits. Placing an ad is not sufficient enough evidences without quality supporting evidences from the vendor that it was a reduction in accounts payable. When using such a small sample it is critical that the items selected can adequately represent the entire population of the list (Arens, Elder, & Beasley, 2012, pp. 175-206). When the auditors check Springbrook Distributors Credits which Grande controller told auditors three different stories as to why there were 28 credit memos (fictitious). Then when the auditors looked at the credit memos they indicated the credits were for three other reasons. The auditors wanted to a conformation of the credits. So the president of Grande Stores acted like he called the Springbrook president. Handing the phone to the auditors not letting them know it really was an officer of Grande Stores. This officer confirmed the credits over the phone. But the officer would not give a written confirmation supporting this credit. Again the auditors allowed this unqualified phone call to be immaterial again. Even the staff auditor thought something was suspicious with the Springbrook Credits but he did not push to investigate farther testing was done to resolve the issue of the validity of the credits. If they would have investigated farther they might have found out what the president of Grande Stores had done (Arens, Elder, & Beasley, 2012, pp. 175-206). When it came to the Ridolfi Credits the auditor could see that it was dated for another year and that things had been marked out. The auditor called Ridolfi and was told that the credits were invalid. But like the other times Ridolfi would not put it in writing. Then the president said not to contact Ridolfi due to pending litigation between them (Grande Stores) and Ridolfi (Arens, Elder, & Beasley, 2012, pp. 175-206).
When it came to Accounts Payable Accrual as to whether using only 50 accounts payable confirmations were enough. They have to have a certain objective evidences to be validated. So by checking a list of accounts payable the auditor needs to make sure it agrees with the balance of the general ledger. When Grande Stores advised the suppliers as how to respond to auditors it made the adequacy and accuracy of the confirmations as evidence this making it significantly undermined. Because this was happening the auditors should have verified the confirmed balances using an alternative procedure. The auditors did not perform any alternative procedures for non-responses or resolutions of the six responses were not reconciled to Grande’s records. The auditors agreed to lower the amount of
