Instructional Notes
Flash Technologies, Inc.:
Risk Analysis and Resolution of
Client Issues
Group Assignment
Mark S. Beasley, Frank A. Buckless,
Steven M. Glover, Douglas F. Prawitt
INSTRUCTIONAL OBJECTIVES
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To provide students with an opportunity to learn (by doing) how auditors identify various client and audit risks. The case also provides students with insight into how a risk analysis ties in to the strategic audit planning process.
To provide students with hands-on experience responding to client concerns and issues. Often auditing students do not realize the extent to which clients request interpretations of standards and financial statement reporting and disclosure issues.
This case requires students to comprehend Flash’s business as well as apply their broader business knowledge. The case also requires students to apply writing and team building skills (if the case is completed in groups).
This case helps students integrate a number of concepts including client acceptance, inherent risk, analytical procedures, acceptable audit risk, audit planning, fraud red flags, risk assessment and financial reporting research.
Flash Technology is based on an actual company (Centennial Technologies, Inc.) that committed a large accounting fraud from 1996 to 1998. When the instructor outlines the details of the fraud the students can compare the risks they identified with the areas containing fraud.
To illustrate that “incredible” intentional accounting manipulations that still take place today
(many famous high profile accounting frauds included in well-known audit cases took place before the average audit student was born).
KEY FACTS
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Flash is a rapidly growing high-tech firm primarily in the PC card business.
Flash is in the process of changing auditors. The company believes they need a larger international professional services firm to manage their growing international business.
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