Auditing accountingThe following information was obtained from several accounting and auditing enforcement releases issued by securities and exchange commission (SEC) after its investigation of fraudulent financial reporting involving reporting involving just for feet inc.Just feet Inc was national retailer of athletic and outdoor footwear and apparel based in Birmingham AL. The company incurred large amounts of advertising expenses and most vendors offered financial assistance through amounts of advertising expenses and most vendors offered financial assistance through unwritten agreement just for feet to help pay for these advertising expenses. If just for feet promoted a particular vendors products is one of it advertisement that vendor typically would consider agreeing to provide and advertising co-op credit to the company to share the costs of the advertisements. Just for feet offset this co-op revenue was contingent upon subsequent approval by the vendor approved the purchased for what vendor. During fiscal year 1998 the company CFO, controller and VP of operations directed he company accounting departments to boom co-op receivables and related revenues that they knew were not owned by certain vendors including Asics, New balance, Nike, and Reebok. These fraudulent practices resulted in over 19 million in fictitious pretax earnings, being reported out of total pretax income of approximately $ 43 million. The SEc ultimately brought charges against a number of senior executives at just for feet and some vendor representative.1. what does it mean to approach an audit with an attitude of professional skepticism?2.What circumstances related to the accounting treatments of the vendor allowances should increase an auditors professional skepticism?3.. What factors might have caused the auditor to inappropriately accept he assertions by management that the vendor allowances should be reflected in the financial statements.4. Develop three probing questions related to the vendor allowances that the auditor should have asked in the audit of just for feets’ financial statements
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