Golden Bear Golf
Gold Bear Golf, INC.
1. The professional auditing standards have a set of five management assertions. Of the five assertions, three are very important in regards to the Paragon audit. The descriptions below, audit procedure is explained that would have ensured the audit was completed accurately.
a. Occurrence- The management assertion that ensures a particular transaction actually happened. In the case of a construction company such as Paragon, this could be verified by going to a job site and checking to see if the job is actually happening.
b. Valuation/Allocation- The management assertion that ensures the transactions are accounted for the correct amount. Changing from percentage-of completion method to the earned value method resulted in significantly overstated revenues and material misstatements in the financial statements. The audit procedure that should take place in this situation is inspection of the records. Looking back at the records would show the change was not supported by the accepted accounting standards.
c. Presentation/Disclosure- The management assertion that ensures all changes within a company are stated in the notes of the financials. These changes should be easy to understand and depict a complete picture of the company from the year. The audit procedure that should have taken place during the audit is inquiry. Sullivan and the staff should have questioned the managers on his or her decisions instead of taking their word as to why the changes were made.
2. The audit failures the SEC were referring to was the fact that Sullivan and his staff relied on the manager’s word. Sullivan and staff did not perform the accurate assertions to test the information provided from Paragon’s managers. The audit partner, Sullivan in this case, is the individual who is in charge of ensuring everyone on the audit is performing his or her job completely and accurately. Sullivan will take the blunt of the responsibility because he is ultimately the
1. The professional auditing standards have a set of five management assertions. Of the five assertions, three are very important in regards to the Paragon audit. The descriptions below, audit procedure is explained that would have ensured the audit was completed accurately.
a. Occurrence- The management assertion that ensures a particular transaction actually happened. In the case of a construction company such as Paragon, this could be verified by going to a job site and checking to see if the job is actually happening.
b. Valuation/Allocation- The management assertion that ensures the transactions are accounted for the correct amount. Changing from percentage-of completion method to the earned value method resulted in significantly overstated revenues and material misstatements in the financial statements. The audit procedure that should take place in this situation is inspection of the records. Looking back at the records would show the change was not supported by the accepted accounting standards.
c. Presentation/Disclosure- The management assertion that ensures all changes within a company are stated in the notes of the financials. These changes should be easy to understand and depict a complete picture of the company from the year. The audit procedure that should have taken place during the audit is inquiry. Sullivan and the staff should have questioned the managers on his or her decisions instead of taking their word as to why the changes were made.
2. The audit failures the SEC were referring to was the fact that Sullivan and his staff relied on the manager’s word. Sullivan and staff did not perform the accurate assertions to test the information provided from Paragon’s managers. The audit partner, Sullivan in this case, is the individual who is in charge of ensuring everyone on the audit is performing his or her job completely and accurately. Sullivan will take the blunt of the responsibility because he is ultimately the