Jack Greenberg, Inc.

Family owned traffic is a business that is owned by one family, most of the shareholders are from the same family. One of the major problems in this type of business is a conflict in interests among the familys member. The hearer should be careful and observe the type of the relationship among the familys member. on that point should be a written agreement to specify in good orders, duties, and obligations for each member, the listener should read those documents for further information.One issue that faced the meeter is to understand the emplacement of each member, the risk of manipulating facts can be existed due to the close relationship. In the case of Jack Greenberg, the son has manipulated the numbers in the record for his spawns sake and no one would be able to hold him since he is one of the owners. The possibility of hiding facts is high in this material body of business because of the close relationship among the familys member.I believe the family owned business demands more effort from the inspector to check and discover misstatements. 2. For the prepaid memorandum I would recommend that the tender should focus on the look oning objective lenss existing, occurrence, paygrade and allocation, completeness, and right and obligation. Prepaid items represent a complete listing of the bon tons costs that are allocable to future periods and that can pretty be expected to be realized through future operations.As for the merchandise, the auditor should physically observe the size up to verify the amount save, the most significant part of the observation of blood line is to determine whether the physical count is being taken in accordance with the clients instructions. The audit objective related to merchandise are * Existence Inventory as recorded on tags exists. * Completeness Existing stock list is counted and tagged. * Accuracy Inventory is counted accurately. * Realizable jimmy Obsolete and unusable inventory items are excluded or noted. Rights The client has rights to inventory recorded on tags. * Classification Inventory is classified correctly on the tags. * Cutoff Transactions are recorded in the proper period. 3. congenital evidence is created, used, and retained within the clients organization and without the attend to of outside parties for example sales invoices duplicate copy, employees time reports, inventory reports, and bribe requisitions. On the other hand, external evidence originates outside the clients organization for example bank statement.This type of documents generally prepared in the ordinary course of business activities and form part of its records whether of accounting or non-accounting nature. Sometimes obtained directly from source such as bank, debtors, and creditors confirmations. External evidence and the inwroughtly generated evidence circulated externally are more reliable than the innate evidence. 4. Walkthrough is simply the act of tracing a transaction through organ isational records and procedures, a commonaltysense approach to learning how a process works.The take of walkthrough procedure is to evaluate the reliability of the clients accounting system. The auditor looks at the living documentation for a transaction from its starting point and then speak to examine the accounting system steps thereafter until ultimate appetite of the item. The walk-through examination is one of the tests that is important for the auditor to obtain an discernment of the clients business. The U. S.Public Company Accounting Oversight Board (PCAOB) has draw attention to a fundamental audit procedures, one that is so common that auditors may take it for granted is the walkthrough procedure. Most auditors traditionally have viewed walkthroughs as the procedure of choice when attempting to develop an understanding of key processes and cozy controls of a client. Now, walkthroughs are required when certifying financial reporting controls under Section 404 of th e U. S. Sarbanes-Oxley fleck of 2002. As it relates to Audit Standard No. from the PCAOB, the standard includes a essential that the auditor must perform a walkthrough for each of the companys significant processes. 5. I would highly recommend that the auditor should extend the grasp of strong test and increase the sample size in order to discover other misstatements that existed. The auditor also could trace documents to testify whether the inventory has been listed accurately. Analytical procedure and test of detail as part of substantive test to find the relationship between the inventory account and other accounts in the financial statements.Cut off test with physical observation to the inventory would help to discover fraud and any misstatement in the inventory account. In addition, the auditor may use confirmation to confirm amount listed in the record with third parties. 6. I think the audit firm state is to inform the client that there are weaknesses in their current i nternal control however the audit firm does not have the right to force the client to do some action regarding those deficiencies. The auditor should probe to persuade the client and reveal the risks of having such a weak internal control system.In case the client did not cooperate with the auditor, the auditor should part with from performing audit services to the client he or she should check that decision. The general Accepted Auditing Standards -AU 150 paragraph 2- require the auditor to accommodate independence as a general rule, the auditor must also exercise due professional care in the performance of the audit and the preparation of the report therefore, in order to maintain the auditor independence, the auditor should have his or her own voice and not just follow the clients rule.