Case:
Review the case 7-9, The North Face, Inc.
Respond to the following:
1. Use the fraud triangle to analyze the red flags that existed in the case and the role and responsibilities of the auditors at Deloitte &Touche in The North Face accounting fraud.
2. Identify the general principles that dictate when revenue should be recorded. How did North Face violate those rules?
3. Evaluate the actions of Deloitte &Touche first proposing an audit adjustment on the $1.64 million balance of the December 29, 1997, transaction with the barter company and then passing on the adjustment based on it not having a material effect on the financial statements. In this regard, should auditors conceal materiality levels from audit clients?