Campbell Soup Company: Case Analysis
Case 2.7 Campbell Soup Company
2. Suppose that a company uses one or more of the practices that you identified in responding to the previous question. What implications, if any, do those practices have for the companys independent auditors?
The implications for independent auditors are: 1) Companies pose a higher risk 2) More testing would be required 3) Auditors may be allowed to charge a premium fee 4) Auditors' reputation could be at stake 5) Adjustments required reflecting real earnings may become more complex and subjecting to further discussion with management.
3. What auditing standard, of any, requires auditors to determine whether their clients have properly classified key amounts in their periodic income statements? Identify three methods that audit clients can use to put a favorable spin on their reported operating results without changing their bottom line or net income.
AU 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles: 411.04 says, "The auditor's opinion that financial statements present fairly an entity's financial position, results of operations ... as to whether (a) the accounting principles selected and applied have general acceptance ... (d) the information presented in the financial statements is classified and summarized in a reasonable manner, that is, neither too detailed nor too condensed (see section 431) ... AU 508, Reports on Audited Financial...
Facts
Our client, Willy, Is a traveling medical equipment salesman from Cincinnati, Ohio. He spends most of his time In Louisville Kentucky. On his business trips, which he spends a lot of consecutive nights at hotels, he is meeting with clients. He doesn’t have a home office that he must report to daily. When he is not on the road with clients, he is at his home residence doing the needed paperwork and other job related tasks. Pays for all of his travel expenses, food and hotel, out of his own pocket.
Issue presented
1. Is
2. Suppose that a company uses one or more of the practices that you identified in responding to the previous question. What implications, if any, do those practices have for the companys independent auditors?
The implications for independent auditors are: 1) Companies pose a higher risk 2) More testing would be required 3) Auditors may be allowed to charge a premium fee 4) Auditors' reputation could be at stake 5) Adjustments required reflecting real earnings may become more complex and subjecting to further discussion with management.
3. What auditing standard, of any, requires auditors to determine whether their clients have properly classified key amounts in their periodic income statements? Identify three methods that audit clients can use to put a favorable spin on their reported operating results without changing their bottom line or net income.
AU 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles: 411.04 says, "The auditor's opinion that financial statements present fairly an entity's financial position, results of operations ... as to whether (a) the accounting principles selected and applied have general acceptance ... (d) the information presented in the financial statements is classified and summarized in a reasonable manner, that is, neither too detailed nor too condensed (see section 431) ... AU 508, Reports on Audited Financial...
Facts
Our client, Willy, Is a traveling medical equipment salesman from Cincinnati, Ohio. He spends most of his time In Louisville Kentucky. On his business trips, which he spends a lot of consecutive nights at hotels, he is meeting with clients. He doesn’t have a home office that he must report to daily. When he is not on the road with clients, he is at his home residence doing the needed paperwork and other job related tasks. Pays for all of his travel expenses, food and hotel, out of his own pocket.
Issue presented
1. Is