one page sol for question 7. Single space and font 11 in times new roman. real professional as i...

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one page sol for question 7. Single space and font 11 in times new roman. real professional as i need full grades as imm failin this course.

David · Accepted Answer

[7] (a) Auditing Standard No. 12 Identifying and Assessing Risks of Material Misstatement, issued by 
the PCAOB provides for and discusses various audit procedures that need to be adopted by the auditor 
for the purpose of identifying and also assessing the risks of material misstatement. Further, these 
procedures are based upon and consider all internal and external factors related to the company in 
reference. Bases on these and applying these to the case of Phar-Mor,Inc., it is seen that the various 
factors which would have contributed to high inherent risk assessment can be listed as under – 
1. There was a lack of adequate management information systems (MIS) in case of Phar-Mor. 
2. There were existing poor internal controls in the company. 
3. The internal audit function was inadequate and later the CFO forestalled all related activities 
and eliminated it altogether. 
4. There was collusion amongst various members of the upper management as also the 
employees in the accounting department. 
5. Phar-Mor involved itself in several hard-to –reconcile accounting practices such as 
overstating its major assets, being account receivable and inventory. 
(b) In view of the recent corporate frauds globally, it becomes imperative that the auditors share 
considerable, if not equal,

one page sol for question 7. Single space and font 11 in times new roman. real professional as i need full grades as imm failin this course.

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