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Beazer Homes: earnings manipulation and risk mitigation idea

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In the Beazer Homes USA case (i.e., Case 10), the chief accounting officer was accused of duping the external auditors through the use of an earnings manipulation scheme. Imagine that you were the auditor of the mortgage company. Design an audit plan to address the important accounting issues highlighted in the case. For each issue identified, recommend a risk mitigation strategy.

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Solution Summary

Your discussion is 310 words and a references and gives you six ideas to address the abuses of Beazer.

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Planning phase:

I would note that extreme pressure to meet earnings targets and unrealistic budgets and assume that there would be high pressure, one of the three key elements of the fraud triangle. Second, I would note the significant material weaknesses, creating opportunity, another element in the fraud triangle. These two elements would have created a perfect stew pot for fraudulent reporting. So, the inherent and control risk would be high. Thus, the amount and the quality of audit evidence needed would be the maximum to ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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