Assignment Item 1: Overstated income (overstated revenues, understated expenses or a combination) is an area of concern to the SEC. Go to http://www.sec.gov/divisions/enforce/friactions.shtml and locate an enforcement release where there is a discussion of overstated income and issues with the audit or auditor. Prepare a memo to explain why the SEC had an issue with income overstatement and how the auditor could have done a better job.
Assignment Item 2: Your team is to consider the issues presented in the Hamilton Corporation case posted on Blackboard. You are provided related information from KPMG as well. Answer questions 1 and 2 at the end of the case, and also answer this question (we’ll refer to it as question 3):
3. As the auditor, how would you expect to address the fraud risks you have identified? How does the fraud risk impact on audit risk and how do you expect this risk to impact on your audit and its planning? You are not expected to research this issue or consider information in your text after Chapter 5. You may find your basic knowledge of accounting helpful, as well as the application of good business practices you have learned.
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