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Task 4. Listen to a conversation between an auditor and a COO and complete it.



Before you read the passage, talk about these questions.

1. Why do businesses get audited?

2. What are some of the problems that show up in audits?


Task 1. Read the letter.

FROM: Patrick Stevens, Auditor, Thomas and Riley LLP

TO: Jack riley, Thomas and Riley LLP

Mr. Riley,

I have completed my audit of Endless Magic Toy Company. Unfortunately, I cannot give a clean opinion of this company without material adjustments to the financial statements. I found a few anomalous entries in its books that should be attended to.


First, I noticed that the reported sales figures do not match the actual revenue. At first, I thought it could have been a simple clerical error. But then I recalled something I had read earlier about bonuses for sales people. Sure enough, it appears the sales people reported erroneous sales figures – sales that won’t actually occur until next quarter. I believe they did this in order to surpass the bonus cutoff point.


The second improprietythat I found had to do with some new manufacturing equipment. As you know, these assets should have been capitalized and depreciated over their useful life. But someone chose to write the entire purchase price off as an expense. Any government tax department employee would see this immediately in an audit.


I am surprised by the lack of professional skepticism on the part of Endless Magic Toy Company’s internal auditor. I have a meeting with the Chief Operating Officer tomorrow, and I plan to discuss these issues with her.



Patrick Stevens


Task 2. Choose the correct answers.

1. What is the passage mainly about?

a. the results of an audit

b. how to make material adjustments

c. the results of a meeting with the COO

d. problems with Thomas and Riley’s books

2. What did Endless Magic’s salespeople do?

a. they made a clerical error

b. they falsified sales information

c. they made material adjustments

d. they showed professional skepticism

3. What did the company do when it purchased new equipment?

a. it depreciated the equipment

b. it capitalized its old equipment

c. it wrote off the purchase as an expense

d. it got advice from a government employee



Task 3. Match the words (1-5) with the definitions (a-e)

a. anomalous b. cutoff point c. chief operating officer d. impropriety e. professional skepticism a. a corporate executive in charge of operations b. the level that must be reached to receive some reward c. the critical attitude an auditor must have d. any activity that is unethical e. out of the ordinary


Task 4. Listen to a conversation between an auditor and a COO and complete it.

Auditor: Well, there are a few things we need to discuss.

COO: OK. ________ _________ .

Auditor: First of all, there seems to be a problem with the sales people _________ _________ _________ .

COO: Wow. Are you sure about that?

Auditor: Yes, completely sure. _________ _________ _________ actual revenue to the sales reports.

COO: Why would they do that?

Auditor: Well, it looks to me like they were _________ _________ ________ ________ that they __________ ________ _________ .

COO: I’m definitely going to ____________ ________ ________ ________ . What else do we need to discuss?


Task 5. You are an account. Use the letter and the conversation to write a brief letter to one of the company’s executives about an audit that you performed. Talk about:

· whether or not you can give a clean opinion

· anomalous entries




Date: 2015-12-24; view: 1995

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