SpineHealth Ltd.: Planning the Financial Statement Audit Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

SpineHealth Ltd.: Planning the Financial Statement Audit Case Study Solution

After assessing and evaluating the contingency liabilities issues at SpineHealthagainst the claim of patient about the complication to his SpineX surgery caused by the defect in implant, the it is analyzed that the there is an indication of the ethical issues with regard to conduct the unethical accounting practices which includes quality improvement activities as well as the safety of the patient, presenting the ethical risk to the patient. The company should act in accordance with the ethical guide to deal with the ethical risk which are relayed to the activities of patient safety.

SpineHealth is the member of the Medtech Canada which is a Canadian based association of the medical technology and it has adopted the code of conduct of the Medtech Canada which address the ethical issues in appropriate manner for instance; each and every employee working at SpineHealth is liable to attend the code of ethics training which is delivered by the Medtech Canada.. Despite of the compliance of the policies in accordance with the Medtech Canada Code of Ethics, the Formagraft product of SpineHealth infringed upon various patents which has been held by Vantage Medical Limited, it is somehow unethical for the medicalservice providers to patent a diagnostic or the surgical treatment and if the product of SpineHealth infringed upon various patents held by Vantage Medical Limited, the company should have made the full payment of the damages to VML.

Approach

Overall, the level of acceptable audit risk is lower due to which the desired level of certainty or assurance is higher. The system of the internal control of the client which includes procedures and policies put in place to enhance the reliability of the financials of the company failed to detect or prevent the materialmisstatement. It is because of the likelihood of overstating the revenues or account receivables caused by the absence of the side agreement and the likelihood of the modification in the sales terms and conditions.

In addition to this, the audits of the prior year have found that the control environmentwas strong at SpineHealth. The company’s executive team is competent as well as experienced and holds the required certification or qualification which tends to commensurate with their respective roles and duties. Additionally, the policies and procedures of the company compliance in accordance with the Medtech Canada Code of Ethics and all the employees are required to attend the code of ethics training which the delivered by Medtech Canada. Not only this, the CEO and CFO grants the approval of the final divisional budget and each RSD is accountable and responsible to review as well as investigate the budget to actual sales variance on the monthly basis and then report to the VP sales.

In addition to this, the risk based audit approach is used which is primarily driven by the risk that result in a higher risk of the misstatement of accounts in the financial statements. Irrespective of the assessed material misstatement risks, which take into consideration the assessment and evaluation of the operating effectiveness of the control, I am required to perform as well as design the substantive procedures for each material class of account balance and transaction.

At the various levels within an organization, the Management are in position to perpetrate the frauds due to their capability of manipulating the accounting records, overstate the financial accounts and prepare fraudulent financial statements through overriding controls that appears to be effectively operating. Our audit team plans to address these sort of risk within an organization through performing the audit procedures that would tend to cover wide range of areas;