Abstract The Northern Frontier Park (NFP) case describes a setting in which a business is about to be sold by existing shareholders to NFP's Chief Financial Officer. The selling price will be based on earnings reported in NFP's financial statements, which are to be examined by an auditing firm as part of a special investigation. Students assume the role of an audit senior responsible for planning the special investigation. In this role, students are required to identify relevant risks that affect the likelihood of earnings misstatement, examine draft financial statements for evidence of apparent misstatements and recognize unique aspects of the business environment that require special attention during the investigation. Three contributions arise from the case and teaching notes. First, the special investigation setting allows early introduction of the case in auditing courses—instructors do not have to wait until topics such as inherent and control risks are discussed before challenging students to identify relevant risks. Second, the unique business context highlights the need to consider the specific nature of the client's business when planning engagements. These important distinctions from one business to the next can often be blurred in traditional manufacturing and retail settings. Finally, the case requires students to evaluate the appropriateness of financial statement policies for establishing a selling price for the business, thereby illustrating the links among attestation, business valuation and prior courses in the accounting curriculum. Further, the evaluation of financial statement policies is placed in a setting of possible income understatement—an important setting not typically emphasized in textbooks and other case materials.
Phillips et al. (Sun,) studied this question.