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Essay / Research Paper Abstract
This 4-page paper discusses Amre's accounting fraud of the late 1980s and what assertions from SAS 31 (Evidential Matters) auditor PricewaterhouseCoopers should have considered in the company's financial statements. Bibliography lists 1 source.
Page Count:
4 pages (~225 words per page)
File: D0_MTamreanly.rtf
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Unformatted sample text from the term paper:
involving actions such as capitalizing advertising costs can also slip into the fraudulent action scenario. Amre Inc. was a seller of home
siding and kitchen cabinets through direct mail and TV advertising. When the company received leads and indications of interest from possible customers and buyers, it entered the information into a
lead bank for sales calls. But rather than filing the costs of lead generation as a current period expense, Amre capitalized the costs. What happened, from a reporting standpoint, is
that the advertising costs and expenses were deferred to later period, which boosted Amres short-term earnings. Though this was not necessary
improper (and could have been an error on Amres part), the company then used the information to inflate the price of its listed stock. The company did this by inflating
the actual number of leads in its lead bank to match the companys earnings target. The company also played around with other financial figures by recording phony inventory results, booking
sales revenue before the sales actually occurred and didnt recognize its operating expenses - all in an effort to boost earnings (as well as to over-inflate its stock prices). The
SEC eventually stepped in when the inflated financials came to light, and enforced actions against both company and officials for perpetrating the fraud. Also in the mix was Amres auditing
company, PricewaterhouseCoopers, which had failed to see the fraud when it had occurred. Pricewaterhouse had no leg to stand on for ignorance,
because of Auditing Standard Boards SAS 31, Evidential Matter and its five assertions. These are 1) existence/occurrence; 2) completeness; 3) rights and obligations; 4) valuation and allocation; and 5) presentation
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