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Dollar General Stores, Inc Audit Principle Violated

(Knapp, W. 8e. PP. 193-195)

1 Identify audit procedures that might have detected the improper accounting treatment applied by Dollar General to the transaction with IBM.
2. Identify the accounting concepts or principles violated by Dollar General in this case. Defend each of your choices.
3. Under what circumstances, if any, are "earnings management" techniques acceptable under GAAP? Under what circumstances, if any, are such techniques ethical? Explain.
4. In addition to the parties identified in this case, what other parties bore some degree of responsibilities for the improper accounting applied to the Dollar General-IBM transaction? Explain.

Solution Preview

Case 2.5 Dollar General Stores, Inc. (Knapp, W. 8e. PP. 193-195)
QUESTIONS:

1 Identify audit procedures that might have detected the improper accounting treatment applied by Dollar General to the transaction with IBM.

First, it would be a bit suspicious not to have ANY gain or loss. Really, what are the odds that it would be EXACTLY the book value when you sold it? So, upon reviewing the gains and losses on disposals, you would be a bit alerted from an analytical procedures view. You would review the asset ledgers for large transactions and those near year end. You would inquire about what you did with the old registers when you noticed the new ones (large purchase) and when you saw that the purchaser was also the vendor who sold the new ones, you would be alerted.

2. Identify the accounting concepts or principles violated by Dollar General in this case. Defend each of your choices.

We ...

Solution Summary

Your tutorial is 460 words and gives you the qualitative characteristics that are violated in this transactions, how the auditors should have found this, and the parties who bore some responsibility. This is a discussion of the case and does not address detailed auditing standards.

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