Grande Stores is a large discount catalog department store chain. The company has recently expanded from 6 to 43 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that Grande materially overstated net income. Theis was accomplished by understating accounts payable and recording fictitious supplier credits that further reduced accounts payable. An SEC investigation was critical of the evidence gathered by Grande’s audit firm, Montgomery & Ross, in testing accounts payable and the supplier credits.
The following is a description of some of the fictitious supplier credits and unrecorded amounts in accounts payable, as well as the audit procedures.
1. Neo: too much
2. typing. I’m sure
3. you have a copy
4. of 1 thru 4.
Identify deficiencies in the sufficiency and appropriateness of the evidence gathered in the audit of accounts payable of Grande Stores.
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