Read the following research paper and answer this question: How can audit seniors prevent material misstatement of revenue in future?( Hammersley, J.S., Johnstone, K. M and Kadous, K., 2011. How do audit seniors respond to heightened fraud risk? Auditing: A Journal of Practice & Theory, 30(3), pp .81-101.)

Indicate whether the information indicates an increased risk for fraud. If the information indicates an increased risk of fraud, indicate which fraud condition (incentives/pressures, opportunities, or attitudes/rationalization) is indicated. During audit planning, an auditor obtained the following information: Management has a strong interest in employing inappropriate means to minimize reported earnings for tax-motivated reasons. The company’s board of directors includes a majority of directors who are independent of management. Assets and revenues are based on significant estimates that involve subjective judgments and uncertainties that are hard to corroborate. The company is marginally able to meet exchange listing and debt covenant requirements. New accounting pronouncements have resulted in explanatory paragraphs for consistency for the company and other firms in the industry.

Assume a third party such as a successor audit firm quickly discovers a fraud that the predecessor external auditor has overlooked for years. Do you think this provides evidence supporting scienter? Explain.

At Crazy Eddie, the management team established “deceiving the auditors” as a primary strategic objective. If management spends considerable time and effort on this goal, is it possible that the auditor can still fulfill his or her mission of ensuring the financial statements are not materially misstated? If so, what steps can an auditor take to overcome these types of situations?

A client uses percentages of aging categories to calculate the allowance for doubtful accounts.  When auditing the allowance for doubtful accounts, the auditor must…   Question 4 options:   Ensure that the client’s aging categories are consistent with industry averages.   Ensure that the client has calculated the allowance for the current and all prior years using the same percentages for uncollectible accounts.   Perform tests to ensure that the aging categories are accurate.   Perform tests to ensure that management has not exercised judgment when calculating the allowance for doubtful accounts.

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Imagine you work for an auditing firm. Your most recent task is to determine whether your firm should bid to perform a public company's auditing services. Determine the fundamental kind of information you need to make an informed decision about whether to bid on the audit. Provide your rationale.

Read the case. Then answer the questions based on it.   BACKGROUND: Audit standards indicate that there is a presumption that auditors will confirm accounts receivable unless the balance is immaterial, confirmations are deemed ineffective, or the auditors' assessment of risk is low and other procedures will achieve the same objective. However, these instances are considered few and far between and current trends in auditing indicate that there is an expectation that accounts receivable will be confirmed. Auditors may stratify the population, use haphazard or judgmental sampling, and send positive or negative requests.   Jenner & Jenner CPAs are the auditors for the Leno Company. In reviewing the accounts receivable aging, the auditors learn that there is a high number of accounts with balances, there are some very large and very small balances, and many customers' balances consist of multiple invoices. 2. How should the auditors mitigate the risk associated with both very large and…

Explain one way the external auditor's responsibilities regarding a public company's system of internal controls have changed since SAS 78 became effective in the late 1990s. Were these changes necessary? Do you believe the changes have been effective at reducing risk for the company and the users of the financial statements?  Explain your rationale.

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