AC503 Heather Friday Unit 3 Case Study Just for Feet

The inventory turnover appears to be low, leaving the inventory as the majority of the total assets. Also, negative cash flow from operations raises a red flag for auditors. The accounts payable/debt increase would raise red flags for auditors as well.

 

2. Just for Feet operated large, high volume retail stores. Identify internal control risks common to such businesses. How should these risks affect the audit planning decisions for such a client?

 

Some of the internal risks for retail stores would be inventory counting and valuation methods, separation of duties, theft, and false documentation due to lack of knowledge of proper accounting procedures since most retail stores have a high employee turnover rate. These risks should be accounted for by the auditor when assessing how high risk the company is. This will allow proper audit assessments are used in order to detect fraud.
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