North Face Inc Case Study

The North Face, Inc.

In my personal opinion I don't think that auditors should insist that their clients accept all proposed audit adjustments. At the end it is not the auditors company. Even though, it would be simpler if management decided to at least review the proposed adjustment. Sometimes the proposed adjustments can have an immaterial effect. This means that it is not that important as a material effect. Even though auditors don't have to insist they cannot ignore this adjustments especially when it will have an impact on the financial statements.

Auditor's responsibility is to take explicit measures to prevent their clients from knowing what is going on. Let's say that perhaps a client did a fraud and would be audited. What would happen if the auditor found out about the fraud? It would not be good for the client. Of course the client would want to know what the auditor is reviewing and what his opinion is. The client would use all the means that they can to gather information on the auditors work. A secretary of the client, or a messenger could look into the auditors work. Who would suspect? If an auditor hides all the audit documentation than the final opinion would be more accurate. On the other hand, if the auditor shares the information the client could do something to change the records and the accuracy would be in doubt.

Permit me to say that before revenue is recognized in an entity's accounting records it should be both realized and earned. In other words just because you have a contract in mind does not mean it is correct to record it in the journal. Imagine that I have a computer store and I am the only company in town that sells them. A school just opened and it is looking for someone to supply them with computers. I believe that they are going to buy them from me and I go ahead and count an approximate of how many computers each classroom would need. No one has told me that they will buy them from me, but I assume they will. I ask my workers to pack all the computers, and since it's the end of the month I ask my accountant to go ahead and record the sale, or revenue of the sale. Three days go by and I find out that the school bought the computers in another place at a cheaper price. I know I did wrong, but I don't want to reverse the recording of sale because this will make my company financial statements look bad. One thing that did not happen in the barter transaction was that the transaction had to be accounted properly (Steinberg). There was a document that was sign, but not legal. This document was only use to hide the real thing.

Auditors are well prepared and trained to do their job. They do not necessarily need something to record the process, but it is better if they do if they want an accurate opinion. It is better if everything is recorded with precise details. According to the textbook audit documentation serves to