An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Michael C Knapp
University of Oklahoma

Carol A Knapp
University of Oklahoma

Abstract: Identification and asssessment of audit risk factors is a critical responsibility on every audit engagement. This case provides students an opportunity to identify, analyze, and discuss the audit risk factors present during the 1998 audit of Just for Feet, Inc. below a threshold level, with the increase of the cash-flow rights held by the controlling stockholder, the profit-diverting shares probably will go up, and the Tobin’s q of a listed company maybe go down.; only after that threshold point,does the profit-diversion share become a decreasing function of the cash-flow rights held by the controlling stockholder ,and hence does Tobin’s q become an increasing function of the cash-flow rights held by the controlling stockholder. threshold point,doallegations that the 1998 Just for Feet audit was deficient in numerous respects. In particular, the Deloitte auditors apparently failed to properly consider the implications of several key audit risk factors.

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