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Case 5.3 the North Face Inc.

In: Business and Management

Submitted By noname1
Words 609
Pages 3
John Mullin
Audit
Case 5.3 North face Inc.
10/10/12

North Face Inc.

1. As an auditor, your job is to examine companies’ financial statements and make sure the information correctly reflects the economic events that occurred during the accounting period. When a mistake is found the auditor determines if the misstatement is material or immaterial. Misstatements are material when they affect a person’s decision using the financial statements and are immaterial if there is no effect on a person’s decision. When an auditor comes across a misstatement of the financial statements that is considered immaterial, they should recognize it and suggest that management fix it. Since it is immaterial, the auditor shouldn’t insist if management decides not to take the auditors suggestion because after all it is immaterial and will not affect anyone’s decision based on the financial statements.
2. With unethical people out there in the world, like in this case Crawford, auditors should try not to let their clients be aware of the materiality thresholds that are set and used for the audit. If management or other employees find out this information, they can use it to manipulate the records, accounts, or the system since they have an idea of what is being looked for. Now, is it feasible for an auditor to conceal this information? I believe it is almost impossible for this information to be held from the client. During an audit, often times the auditors will get assistances from the client’s employees to help with the cost. Auditors will usually ask them to pull records and help with other tasks that will pretty much show them what the auditor is looking for.
3. The FASB Concepts Statement No. 5 “Recognition Measurement in Financial Statements of Business Enterprises” and SFAS No. 48 “Revenue Recognition When Right of Return Exists” are guidelines that dictate

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