Question 1

Risks

High failure rate: Some of the projects fail to break-even leave along making profits given the costs involved.

Risk-seeking management: The industry tends to attract people that are not risk adverse.

Quick obsolescence of products: The demand for the services and products are subject to sudden changes in the interests or tastes of the consumers.

Audit Procedures

Recognizing the production cost: Auditors ought to institute tests to ensure that all costs are recognized during the exact period when they occurred while including the appropriate amount.

Insurance: Things like movies may find it necessary to insure the main performers against illness or injuries.

Reconciling ticket sales and cash receipts: There is the tendency of tickets being sold for different prices at different outlets, and this creates a risk in revenue recognition.

Question 2

Similarities

-Both work to ensure that the financials are heading in the appropriate direction.

-While executing their duties, they both depend on the help of several subordinates.

-The tasks involved for both are challenging and keep changing from time to time.

Differences

-The CFO is responsible for overseeing a single company’s financials while the audit partner is responsible for ensuring that different companies abide by the relevant financial regulations.

-At some point, audit partners work on client development while this is not the case with CFOs.

I believe both roles are stressful and important given that laxity in any of the individuals might result to collapse of a company. In my case, I would prefer the role of a CFO since he/she is also responsible for business planning and development of the financial strategy.

Question 3

Independent auditors require investment from the company for them to become acclimatized to the company’s operations. Corporate executives think that they are well placed to ensure that they maintain the interests of the stakeholders involved hence not viewing the need for the costs involved with the independent auditors. However, there is a need to involve the auditors to ensure that the executive’s actions result to true and fair view presentation of financial statements despite the procedures involved being repetitive every year.

Question 4

-Giving a clear insight into the issues that transpired for the dispute that existed. This helps to ascertain whether the grounds for dismissal by the client were relevant or it was unfair.

-Providing prior audit work papers to the existing auditor to help in the execution of their duties.

Question 5

The relevant accounting principle, in this case, is revenue recognition. Livent’s decision should not have been approved since the seller’s fee was not set and there is no evidence of a sales arrangement.

Such transactions would use some broad accounting concepts to help determine proper accounting treatment. Revenue should be recognized based on two broad concepts; they should be earned and realized. It is earned when the service or good is transferred, payment assurance and final delivery are required to enhance revenue recognition. It is realized when the assets received are readily convertible to cash.

Question 6

The accounting irregularities happened when Messina was not the company’s CFO. For this reason, she feels that she was not the perpetrator of the prevalent fraud. Messina felt “guilty by association” since bringing the issue to light would portray her in a bad way since she was the current CFO.

If I were in Messina’s position, I would have revealed the fraud to the regulatory authorities. This is because upon its discovery, it would appear as if I was covering the fraudulent activities.

Question 7

Due diligence executed by accounting firms concerns range and depth. This normally takes place when the aspect at hand carries rewards and risks. Due diligence is more useful when the expected results are critical or when the importance of something is of high-level. Due diligence should be exercised while making investments, hiring critical employees, lending money among other things.

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