Happiness Express Case

Taylor Albinson

Dr. Shapeero

Auditing

Happiness Express Case

2.) The failed to check in order to see if there was the necessary support documents with sales journal entry that was recorded. They also did not properly test the internal controls in order to determine how much testing should be conducted. Auditors should check in regards to the account because a common red flag in regards to the balance is when there is a significant amount of sales recorded at the end of the year. I believe based on this scenario there was definitely negligence because some of the more common red flags are present that the auditor should be able to identify that there are misstatements and they failed to identify them. I would characterize the mistakes and errors as fraudulent due to the fact that since they failed to identify the misstatements made by the company

3.) Yes, confirming the account balance definitely help as long as it is an independent party. The auditor also should have include in the cutoff statement some of the sales to West Coast Liquidators since this would be able help the auditor since customers say something when they are being falsely charged.

4.) Confirmation help to gather evidence that test the management assertion of existence. Auditors could review subsequent cash receipts and this tests valuation. The auditors can assess correspondence files which test rights and obligations. Auditors can test sales orders, invoices, and shipping documents which tests existence and valuation. They can perform cutoff statement tests which looks at the assertion of completeness.