Reporting Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt INSTRUCTIONAL OBJECTIVES To help students gain an understanding of the steps involved in the scoping process for the audit of internal control over financial reporting. To provide an opportunity for students to determine the significance of accounts and locations based on both quantitative and qualitative metrics in order to plan the nature and extent of the testing of controls. To help students understand the role of testing coverage in terms of significant accounts and locations and also in regards to the overall financial statement picture. To allow students to understand and apply an evaluation methodology to determine the likelihood and magnitude of control deficiencies. To help students appreciate the judgment involved in evaluating internal control deficiencies. KEY FACTS Sarbox Scooter, Inc. is a publicly traded manufacturing firm specializing in motorized scooters and G.P. (Grand Prix) pocket bikes. The company was founded in 1997 and is headquartered in
Basking Bridge, New Jersey. Sarbox Scooters business units are segmented by geographical region into the U.S., Mexico, and Europe.
The U.S. region is further sub-divided into five business units: Northeast, Southeast, Central, Southwest, and Northwest. Sarbox
Scooters management is striving to increase brand share, by 1% each year for the next five years, to 30% of the market. However, increases in brand share will be not be easy as competition in the industry is very intense. The Finance Director of the companys
Mexican division recently resigned following deep scrutiny from Sarbox Scooters internal audit team of his control, monitoring, and reporting practices. a The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State
University and