Happiness Express, Inc. Case 2.3 Essay

1235 Words Apr 22nd, 2011 5 Pages
Q1:
The primary objectives that auditors hope to accomplish by confirming a client's year-end accounts receivable is to check certain management assertions such as existence, rights and obligations, and valuation. Confirmations from clients and outside parties related to a transaction. Generally, the auditor sends to the client's customer a confirmation stating the amount owed. The customers are requested to return a statement to the auditor indicating whether they agree with the amount, or providing information about any exceptions. Confirmation from the debtor of the client is regular procedure to support existence assertion. The client's customer`s ability to pay off the debt is valuation assertion.

The primary objective for
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Coopers & Lybrand were both negligence and reckless of doing audit of Happiness Express, Inc. There were a lot of open evidences for fraudulent activities by Happiness Express which auditors were unable to find because of their unprofessional and reckless approach to their client's business. There was unusually a large increase in year-end sales to a single or a few customers, it should be an indication of the high risk of material misstatements in financial statements, but due to Coopers & Lybrand's negligence and poor audit planning, Happiness Express was successful in its fraudulent activity.
Auditors relied on Goldberg, therefore, in performing their confirmation, they could not assess existence assertion.

Q3:
Coopers & Lybrand should have confirmed the accounts receivables from West Coast Liquidators and other customers at the end of fiscal year 1995 because confirming accounts receivable at the end of the year is an important audit procedure which Coopers & Lybrand recklessly ignored during their audit for Happiness Express, Inc.
Besides accounts receivable, Coopers & Lybrand should also have considered the year-end cutoff because by that, auditor could look at sales and purchases that made at the end of year, to ensure that transactions were recorded in the proper accounting period.
Also, the auditors should have included one or more sales to West Coast Liquidators in

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