Auditor opinion on the occurrence of fraud

Assignment Help Business Economics

Reference no: EM131808026

Auditor's Opinion on the Occurrence of Fraud. Sundback, CGR, is the auditor for Upseerin Manufacturing, a privately owned company in Espoo, Finland, which has a June 30 fiscal year. Upseerin arranged for a substantial bank loan which was dependent upon the bank receiving, by September 30, audited financial statements which showed a current ratio of at least 2 to 1. On September 25, just before the audit report was to be issued, Sundback received an anonymous letter on Upseerin's stationery indicating that a five-year lease by Upseerin, as lessee, of a factory building which was accounted for in the financial statements as an operating lease was in fact a capital lease. The letter stated that there was a secret written agreement with the lessor modifying the lease and creating a capital lease. Sundback confronted the president of Upseerin who admitted that a secret agreement existed but said it was necessary to treat the lease as an operating lease to meet the current ratio requirement of the pending loan and that nobody would ever discover the secret agreement with the lessor. The president said that if Sundback did not issue its report by September 30, Upseerin would sue Sundback for substantial damages which would result from not getting the loan. Under this pressure and because the work papers contained a copy of the five-year lease agreement which supported the operating lease treatment, Sundback issued its report with an unqualified opinion on September 29. In spite of the fact the loan was received, Upseerin went bankrupt within two years. The bank is suing Sundback to recover its losses on the loan and the lessor is suing Sundback to recover uncollected rents.

Required: Answer the following, setting forth reasons for any conclusions stated.

A. Is Sundback liable to the bank?

B. Is Sundback liable to the lessor?

Reference no: EM131808026

Questions Cloud

Determine the contribution margin per machine hour : Ortiz Company is able to produce two products, G and B, with the same machine in its factory. Determine the contribution margin per machine hour

State the highest level of deficiency that you believe : For each of the following independent cases, state the highest level of deficiency that you believe the circumstances represent-a control deficiency.

Sections of the production department : How do you explain the performance, turnover, and quality results in these two sections of the production department?

Find the equivalent resistance at the dashed line : Find The equivalent resistance (Req) at the dashed line. (Combine all resistors to the right of Req to find Req.

Auditor opinion on the occurrence of fraud : Auditor's Opinion on the Occurrence of Fraud. Sundback, CGR, is the auditor for Upseerin Manufacturing, a privately owned company in Espoo

Identify an organizational problem to solve within workplace : The purpose of this assignment is to identify an organizational problem to solve within your current workplace or industry.

Describe the rules of professional conduct : Describe the rules of professional conduct that are relevant for each of the situations described above.

Find what is the payback period : ABC Company is adding a new product line that will require an investment of $1500000. What is the payback period

Compute minnies taxable income assuming she is a dependent : Compute Minnie's taxable income assuming she is self supporting and is not a dependent on anyone else's tax return, and files a 1040 tax return.

User Account

All Pages