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1、AccountingInformationSystemsChapter7SolutionsQ7.1AnswerthefollowingquestionsabouttheauditofSpringer’sLumber&Supplya.WhatdeficienciesexistedintheinternalenvironmentatSpringer’s?The"internalenvironment"referstothetoneorcultureofacompanyandhelpsdeterminehowriskconsc
2、iousnessemployeesare.ItisthefoundationforallotherERMcomponents,providingdisciplineandstructure.Itisessentiallythesamethingasthecontrolenvironmentintheinternalcontrolframework.Theinternalenvironmentalsoreferstomanagement'sattitudetowardinternalcontrol,andtohowthat
3、attitudeisreflectedintheorganization'scontrolpoliciesandprocedures.AtSpringer's,severaldeficienciesinthecontrolenvironmentareapparent:1.Managementauthorityisconcentratedinthreefamilymembers,sotherearefew,ifany,checksandbalancesontheirbehavior.Inaddition,severalot
4、herrelativesandfriendsofthefamilyareonthepayroll.2.Sincethecompanyhasa"nearmonopoly"onthebusinessintheBozemanarea,fewcompetitiveconstraintsrestrainprices,wages,andotherbusinesspractices.3.Linesofauthorityandresponsibilityarelooselydefined,whichmakeitdifficulttoid
5、entifywhoisresponsibleforproblemsordecisions.4.Managementmayhaveengagedin"creativeaccounting"tomakeitsfinancialperformancelookbetter,whichsuggestsamanagementphilosophythatcouldencourageunethicalbehavioramongemployees.b.DoyouagreewiththedecisiontosettlewiththeSpri
6、ngersratherthantoprosecutethemforfraudandembezzlement?Whyorwhynot?WhetherornottosettlewiththeSpringersisamatterofopinion,withreasonableargumentsonbothsidesoftheissue.·Thereasonsforreachingasettlementareclearlystated:thedifficultyofobtainingconvictionsincourt,andt
7、hepossibleadverseeffectsonthecompany'smarketposition.·Ontheotherhand,theevidenceoffraudhereseemsstrong.Ifthiskindofbehaviorisnotpenalized,thentheperpetratorsmaybeencouragedtodoitagain,withfutureadverseconsequencestosociety.c.ShouldthecompanyhavetoldJasonandMariat
8、heresultsofthehigh-levelaudit?Whyorwhynot?WhetherornotJasonandMariashouldhavebeentoldtheresultsofthehigh-levelauditisalsoamatterofopinion.Theinvestigativeteami
