Audit - Quick rise in market share made them the second...

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© W.R. Knechel Inventory: Audit Failures Stories McKessons Robbins/Ultramares Untouchables Warehouseman wouldn't let Dad pull tags Doughtie foods case -manager added extra count sheets and changed units of measure Giant Foods (advertising credits, volume discounts, concessions, merchandise returns, overcharge) Salad Oil King Billie Sol Estes Wallpaper Company No inventory observation -> No unqualified opinion
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© W.R. Knechel Inventory: Audit Failures Sunbeam Chain Saw Al Dunlap (Materiality) Talked customers into accepting products at prices significantly higher than it was worth. Auditors detected it and negotiated the overstatement down to an immaterial amount. An op-ed piece in the WSJ suggested that auditors just don’t get it. It’s material regardless of amount because it was perpetrated by the CEO who actively tried to delude the auditors, shareholders and creditors. This is symptomatic and may signal a much larger problem. Miniscribe 1986 Colorado based Hard Drive Mfr. (inventory obsolescence)
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Unformatted text preview: Quick rise in market share made them the second largest HD mfr. Behind Seagate. However, when their technology fell behind Seagate and others, an investment banker was brought in to turn things around. The IB fired people on the spot and began cooking the books. They had double billing, double counts of inventory being shipped. They put defective HDs and bricks in boxes. The model numbers, which were old, did not conform with the outside of the box. This allowed EI to be up, CGS to be down and NI to be up. This fiasco showed the importance of knowing the clients business and industry and products when examining and valuing inventory. Particularly true with consumer electronic product manufactures where consumer tastes change quickly. Generally, fresh grads do the physical inventory and if they ask a company employee about the process of conducting inventory, theyve lost their independence....
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Audit - Quick rise in market share made them the second...

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