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Kim Smith.
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Noah098
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For instance, the fact that two of the three reported operating segments are showing a drop in performance while the other shows improvement could indicate inaccuracy in the information.
maam I just don’t get this! I don’t understand why is it seen as “indication of inaccurate information” if one of the operating segments is showing an improvement ? I mean its quite normal for few operating segments in a business to be profitable and rest to be loss making…I don’t see it as a reason for auditor’s to raise their eye brows
Kim Smith
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If you study business risks and how audit risk/RoMM relate to business risks – Chapter 11 – for revenue/profits/liquidity etc to change is business risk – and the auditor may indeed be able to confirm by obtaining sufficient appropriate audit evidence that the fluctuation is due to a genuine business reason. But it could be due to misstatement – e.g. expenses of one operating segment have been misallocated to another. The auditor should not dismiss the possibility of misstatement merely because there could be a genuine business reason for a change.
Noah098
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oh so you are saying that it is possible that Bassett group may have allocated the expense of academic journal to other OSs and other OSs revenue could have been deliberately/mistakenly been allocated to academic journal to show that it is profitable for any reason…
Kim Smith
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Yes – I think that is the most obvious possible misstatements that could give rise to the fluctuation.
Noah098
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