Solutions Manual
Auditing Case: An Interactive Learning Approach
By Mark S. Beasley
7th edition
, Instructor resource manual
Seventh edition
Mark s. Beasley frank a. Buckless
steven m. Glover douglas f. Prawitt
new york, ny
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,Vice president, business, economics, and uk courseware: donna battista manager, learning tools: brian surette
Director of portfolio management: adrienne d’ambrosio Content developer, learning tools: sarah peterson
director, courseware portfolio management: ashley dodge Managing producer, digital studio and glp, media production and development:
senior sponsoring editor: neeraj bhalla Ashley santora
Editorial assistant: elisa marks Managing producer, digital studio: diane lombardo
Vice president, product marketing: roxanne mccarley Digital studio producer: regina dasilva
Senior product marketer: tricia murphy digital studio producer: alana coles
Product marketing assistant: marianela silvestri digital content team lead: noel lotz
Manager of field marketing, business publishing: adam goldstein Digital content project lead: martha lachance
Field marketing manager: nayke popovich project manager: liza marie borja, spi global
Vice president, production and digital studio, arts and business: etain o'dea interior design: jonathan liljegren
Director of production, business: jeff holcomb Interior cover art: petrovic igor/shutterstock
managing producer, business: melissa feimer
content producer: sugandh juneja operations
specialist: carol melville
Design lead: kathryn foot
Copyright © 2019, 2015, 2012 by pearson education, inc. Or its affiliates. All rights reserved. This publication is
protected by copyright, and permission should be obtained from the publisher prior to any prohibited
reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise. For information regarding permissions, request forms, and the
appropriate contacts within the pearson education global rights and permissions department, please visit
www.pearsoned.com/permissions/
Acknowledgments of third-party content appear on the appropriate page within the text.
Pearson and always learning are exclusive trademarks owned by pearson education, inc. Or its affiliates in the u.s.
and/or other countries.
Unless otherwise indicated herein, any third-party trademarks, logos, or icons that may appear in this work are the
property of their respective owners, and any references to third-party trademarks, logos, icons, or other trade dress
are for demonstrative or descriptive purposes only. Such references are not intended to imply any sponsorship,
endorsement, authorization, or promotion of pearson’s products by the owners of such marks, or any relationship
between the owner and pearson education, inc., or its affiliates, authors, licensees, or distributors.
Isbn 10: 0-13-442270-8
isbn 13: 978-0-13-442270-1
Verifiedbrainbooster
, PREFACE
auditing cases: an interactive learning approach provides exposure to real-world audit techniques
and hands-on learning for students in both undergraduate and graduate auditing courses. This seventh
edition continues our tradition of providing a rich learning experience for students that challenges them
to apply knowledge learned in the classroom and from traditional auditing textbooks so they can develop
skills to complete tasks they will be asked to do once they enter the accounting and auditing profession.
NEW CASES TO THE SEVENTH EDITION
The seventh edition continues to feature a variety of cases that address different aspects of the audit. Some are
based on real companies, while others are disguised as “hypothetical companies” in order to provide a “surprise
element” once they are completed. Additional cases include examples of client system documentation and audit
workpapers that students prepare and evaluate as if they are on a current audit team.
wells fargo
CASE 3.6 Assessing the impact of ethical culture
This case features the alleged inappropriate sales culture at wells fargo bank that
ultimately led to the ceo’s 2016 testimony in front of the u.s. senate banking
committee and his subsequent resignation. The bank’s audit firm was challenged to
defend its work by four u.s. senators, one of whom included bernie sanders, a recent
candidate for u.s. president.
koss, inc.
CASE 4.8 The sounds of a high-fidelity fraud
This case gives students a “bird's-eye” view of the 9th-largest embezzlement fraud in
U.s. history, which took place at the koss corporation, headquartered in wisconsin.the
case vividly illustrates what can happen when internal control over financial reporting
(icfr) is lax at a public company. The case will be particularly interesting for students
because much of the story of this massive defalcation fraud is introduced through the
words of the company’s ceo and the individual who stole $34 million from the company,
adapted from deposition statements. The case brings to life the importance of effective
icfr, with an emphasis on the control environment, and introduces students to the role
that accountants can play as expert witnesses in court cases.
oilfields-r-us, inc.
CASE 5.8 Evaluation of management review controls
This case introduces students to management review controls (mrcs), an increasingly
important topic in practice for both management and auditors. In a mrc, members of
management review key information and evaluate reasonableness by comparing it to
expected value, such as budget-to-actual comparisons and review of accounting
estimates. This case helps students appreciate the importance of the effective design
and execution of mrcs, and it highlights some of the challenges of evaluating their
effectiveness in audits of internal control over financial reporting.
INSTRUCTOR RESOURCE | DO NOT COPY OR REDISTRIBUTE iii
Copyright © 2019 pearson education, inc. verifiedbrainbooster
Auditing Case: An Interactive Learning Approach
By Mark S. Beasley
7th edition
, Instructor resource manual
Seventh edition
Mark s. Beasley frank a. Buckless
steven m. Glover douglas f. Prawitt
new york, ny
Verifiedbrainbooster
,Vice president, business, economics, and uk courseware: donna battista manager, learning tools: brian surette
Director of portfolio management: adrienne d’ambrosio Content developer, learning tools: sarah peterson
director, courseware portfolio management: ashley dodge Managing producer, digital studio and glp, media production and development:
senior sponsoring editor: neeraj bhalla Ashley santora
Editorial assistant: elisa marks Managing producer, digital studio: diane lombardo
Vice president, product marketing: roxanne mccarley Digital studio producer: regina dasilva
Senior product marketer: tricia murphy digital studio producer: alana coles
Product marketing assistant: marianela silvestri digital content team lead: noel lotz
Manager of field marketing, business publishing: adam goldstein Digital content project lead: martha lachance
Field marketing manager: nayke popovich project manager: liza marie borja, spi global
Vice president, production and digital studio, arts and business: etain o'dea interior design: jonathan liljegren
Director of production, business: jeff holcomb Interior cover art: petrovic igor/shutterstock
managing producer, business: melissa feimer
content producer: sugandh juneja operations
specialist: carol melville
Design lead: kathryn foot
Copyright © 2019, 2015, 2012 by pearson education, inc. Or its affiliates. All rights reserved. This publication is
protected by copyright, and permission should be obtained from the publisher prior to any prohibited
reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise. For information regarding permissions, request forms, and the
appropriate contacts within the pearson education global rights and permissions department, please visit
www.pearsoned.com/permissions/
Acknowledgments of third-party content appear on the appropriate page within the text.
Pearson and always learning are exclusive trademarks owned by pearson education, inc. Or its affiliates in the u.s.
and/or other countries.
Unless otherwise indicated herein, any third-party trademarks, logos, or icons that may appear in this work are the
property of their respective owners, and any references to third-party trademarks, logos, icons, or other trade dress
are for demonstrative or descriptive purposes only. Such references are not intended to imply any sponsorship,
endorsement, authorization, or promotion of pearson’s products by the owners of such marks, or any relationship
between the owner and pearson education, inc., or its affiliates, authors, licensees, or distributors.
Isbn 10: 0-13-442270-8
isbn 13: 978-0-13-442270-1
Verifiedbrainbooster
, PREFACE
auditing cases: an interactive learning approach provides exposure to real-world audit techniques
and hands-on learning for students in both undergraduate and graduate auditing courses. This seventh
edition continues our tradition of providing a rich learning experience for students that challenges them
to apply knowledge learned in the classroom and from traditional auditing textbooks so they can develop
skills to complete tasks they will be asked to do once they enter the accounting and auditing profession.
NEW CASES TO THE SEVENTH EDITION
The seventh edition continues to feature a variety of cases that address different aspects of the audit. Some are
based on real companies, while others are disguised as “hypothetical companies” in order to provide a “surprise
element” once they are completed. Additional cases include examples of client system documentation and audit
workpapers that students prepare and evaluate as if they are on a current audit team.
wells fargo
CASE 3.6 Assessing the impact of ethical culture
This case features the alleged inappropriate sales culture at wells fargo bank that
ultimately led to the ceo’s 2016 testimony in front of the u.s. senate banking
committee and his subsequent resignation. The bank’s audit firm was challenged to
defend its work by four u.s. senators, one of whom included bernie sanders, a recent
candidate for u.s. president.
koss, inc.
CASE 4.8 The sounds of a high-fidelity fraud
This case gives students a “bird's-eye” view of the 9th-largest embezzlement fraud in
U.s. history, which took place at the koss corporation, headquartered in wisconsin.the
case vividly illustrates what can happen when internal control over financial reporting
(icfr) is lax at a public company. The case will be particularly interesting for students
because much of the story of this massive defalcation fraud is introduced through the
words of the company’s ceo and the individual who stole $34 million from the company,
adapted from deposition statements. The case brings to life the importance of effective
icfr, with an emphasis on the control environment, and introduces students to the role
that accountants can play as expert witnesses in court cases.
oilfields-r-us, inc.
CASE 5.8 Evaluation of management review controls
This case introduces students to management review controls (mrcs), an increasingly
important topic in practice for both management and auditors. In a mrc, members of
management review key information and evaluate reasonableness by comparing it to
expected value, such as budget-to-actual comparisons and review of accounting
estimates. This case helps students appreciate the importance of the effective design
and execution of mrcs, and it highlights some of the challenges of evaluating their
effectiveness in audits of internal control over financial reporting.
INSTRUCTOR RESOURCE | DO NOT COPY OR REDISTRIBUTE iii
Copyright © 2019 pearson education, inc. verifiedbrainbooster
