You are an audit supervisor assigned to a new client, Go-Go Corporation, which is listed on the New York Stock Exchange. You visited Go-Go’s corporate headquarters
You are an audit supervisor assigned to anew client, Go-Go Corporation, which is listed on the New York Stock Exchange. You visited Go-Go’s corporate headquarters to become acquainted with key personnel and to conduct ab bpreliminary review of the company’s accounting policies, controls, and systems. During this visit, the following events occurred a. You met with Go-Go’s audit committee, which consists of the corporate controller, treasurer, financial vice president, and budget director. b. You recognized the treasurer as a former aide to Ernie Eggers, who was convicted of fraud several years ago. c. Management explained its plans to change accounting methods for depreciation from the accelerated to the straight-line method. Management implied that if your firm does not concur with this change, Go-Go will employ other auditors. d. You learned that the financial vice president manages a staff of five internal auditors. e. You noted that all management authority seems to reside with three brothers, who serve as chief executive officer, president, and financial vice president. f. You were told that the performance of division and department managers is evaluated on a subjective basis, because Go-Go’s management believes that formal performance evaluation procedures are counterproductive. g. You learned that the company has reported increases in earnings per share for each of the past 25 quarters however, earnings during the current quarter have leveled off and may decline. h. You reviewed the company’s policy and procedures manual, which listed policies for dealing with customers, vendors, and employees. i. Your preliminary assessment is that the accounting systems are well designed
