Advanced Auditing: Cardillo Travel Systems, Inc - Assignment Example

To be specific, the serious accounting irregularity committed by the company during the transaction was the immediate recording of the payment as revenue in the company’s books - as was directed by Cardillo’s chairperson of the board of directors, Mr. Rognlien. Other accounting malpractices that feature are the misrepresentation of the company’s minimum stockholder equity, violations of several provisions of the federal securities laws such as making false representations to outside auditors, failing to maintain accurate financial records and failing to file prompt financial reports with the Securities and Exchange Commission.

Concerning the above-mentioned violations, this assignment seeks to explain the Securities and Exchange Commission’s rationale to charge Cardillo executives with making false representation to outside auditors, failing to maintain accurate financial records, failing to file prompt financial reports with the SEC, violating the insider trading provision of the federal securities laws. In addition, the assignment reveals who was in violation or compliance of the AICPA’s code of professional conduct, the level of efficiency shown by Cardillo’s outside auditors, whether or not the five components of internal control were followed and an argument for auditing and assessing the decision made by Cardillo’s management (Cardillo Travel System, Inc, n.d). According to the case study, Cardillo Travel System Inc, engaged two outside audit firms.

The first engagement with an external independent audit firm involved the company and the two auditing partners – Helen Shepherd and Touche Ross. Cardillo Travel System made a false representation to the partnering auditing firms when Lawrence confirmed to the auditing partners that the $ 203,210 received from the United Airlines was a commission earned by Cardillo Travel System from United Airlines. In the company’s accounting books,