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    Smackey Dog Food: Audit by Keller CPA

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    Q1: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically apply to the Smackey Dog Food client? Keep in mind that we need a certified audit of all financial statements for the year but did not audit the company the prior year.

    Q2: Discuss the 4 stages (p162-163) text) of the audit and the major activities performed by the auditor in each phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

    Q3: Describe Keller CPAs' responsibilities related to determining the adequacy of internal controls. What internal controls issues do you identify? On your internal control questionnaire for management what for or five questions concerning receivables and inventory do you want answered by management.

    Q4: You decide that you will address Smackey Dog Food, Inc.'s accounts receivables through confirmations. Discuss the various types of confirmations and what forms you will implement and why.

    Q5: What are the major factors affecting choosing the proper samples for confirming accounts receivable? Assume two major customers do not return their confirmations, what action do you take in those two situations to verify the balances due from those customers?

    Q6: A major issue in verifying the ending balance in property, plant and equipment is the possibility of legal encumbrances. Discuss what specific concern do you have. Describe the procedures your firm will perform to obtain evidence about existing legal encumbrances.

    Q7: The client wants to know if you will be present at the year-end inventory. What is your decision and why? What role or actions will you take at the inventory if you decide to attend the inventory. Why?

    Q8: Considering the general six functions (pages 685-686 of text) that make up the inventory and warehousing cycle for Smackey Dog Foods, Inc., identify the related documents and/or records that would be used. From your analysis of the internal controls related to the inventory and warehousing cycle of Smackey Dog Foods, Inc., what internal control weaknesses exist?

    Q9: What type of specific analytical procedures would you use at the end of the audit for accounts receivable and inventory reasonableness? What factors would you consider in your reasonableness test that applies to the Smackey Dog Foods, Inc.

    Q10: Discuss the CPA firm's legal liability concerns for this audit if they make a material unintentional or intentional mistake. Include any other legal liability concerns regarding possible Professional Rule violations.

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    Solution Summary

    Answer various questions related to the audit of Smackey Dog Food's financial statements