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ACCT 3005 - Auditing Theory and Practice - Case Study

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University of South Australia

   

Auditing Theory and Practice (ACCT 3005)

   

Added on  2020-03-01

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The main objective of this report is to establish the fact regarding the American accounting association (AAA) model that suggests a seven-step procedure for the purpose of decision-making that takes into consideration the ethical issues. This report will also state the consequences of the overvaluation of the inventory in the financial statement of any company and the auditor’s responsibility regarding the internal control and valuation of inventories. The report will also state whether the auditor will be charged for negligence if they overlook the misstatement of inventory valuation with reference to a case study.

ACCT 3005 - Auditing Theory and Practice - Case Study

   

University of South Australia

   

Auditing Theory and Practice (ACCT 3005)

   Added on 2020-03-01

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Running head: AUDITING THEORY AND PRACTICEAuditing theory and practiceName of the studentName of the universityAuthor note
ACCT 3005 - Auditing Theory and Practice - Case Study_1
1AUDITING THEORY AND PRACTICETable of ContentsExecutive summary....................................................................................................................2Question 1..................................................................................................................................3American Accounting Association (AAA) model.....................................................................3Question 2..................................................................................................................................6Report to MYH’s managing partner..........................................................................................6Case law.....................................................................................................................................7Reference....................................................................................................................................9
ACCT 3005 - Auditing Theory and Practice - Case Study_2
2AUDITING THEORY AND PRACTICEExecutive summaryThe main objective of this report is to establish the fact regarding the American accountingassociation (AAA) model that suggests seven-step procedure for the purpose of decision-making that takes into consideration the ethical issues. The AAA model starts with Step 1through establishment of the case’s facts. Step 2 identifies ethical issues of the case. The 3rdstep involves recognition of values, principles and norms of the case and this further involvesestablishing the decision in the ethical, social and in few cases, within the context ofprofessional behaviour. Under the 4th step all the alternative course of the action isrecognized. Next under step 5 the values, principles and norms those were identified understep 3 are covered within the identified option under step 4. Under step 6, the significance ofthe results is taken into consideration. Finally, under step 7, the decision is made taking intoconsideration all the relevant facts. The report will also state the consequences of overvaluation of the inventory in the financialstatement of any company and the auditor’s responsibility regarding the internal control andvaluation of inventories. The report will also state whether the auditor will be charged fornegligence if they overlook the misstatement of inventory valuation with reference to a casestudy.
ACCT 3005 - Auditing Theory and Practice - Case Study_3
3AUDITING THEORY AND PRACTICEQuestion 1American Accounting Association (AAA) modelThe American Accounting Association (AAA) model established from the report forAAA that was written by Rockness and Langender during 1990. Under the report, it wassuggested by them the seven-step procedure for the purpose of decision making, that takesinto consideration the ethical issues (Abernathy et al., 2015). The AAA model starts with Step 1 through establishment of the case’s facts. This stepindicates when the process of making the decision initiates and there is no uncertainty existsregarding what is to be taken under consideration. Step 2 identifies ethical issues of the case.This step includes the identification of the case’s facts and find out the ethical issues understake (Kothari, Mizik & Roychowdhury, 2015). The 3rd step involves recognition of values,principles and norms of the case and this further involves establishing the decision in theethical, social and in few cases, within the context of professional behaviour. In this context,the professional code of the ethics or social expectation of profession is considered as thevalues, principles and norms. Under the 4th step all the alternative course of the action isrecognized. This includes defining each alternative without taking into consideration thevalues, principles and norms under step 3 with regard to assure the fact that each of theoutcome is taken into consideration irrespective of the fact that the outcome may or may notbe appropriate (Howard et al., 2016). Next, under step 5 the values, principles and normsthose were identified under step 3 are covered within the identified option under step 4. Aftercompleting these, it shall be possible to identify which option fits under the norms and whichoptions are not. Under step 6, the significance of the results is taken into consideration.Finally, under step 7, the decision is made taking into consideration all the relevant facts.
ACCT 3005 - Auditing Theory and Practice - Case Study_4

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