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Auditing

Audit risk model & its components

Helpful Information: Audit risk model: PDR = AAR/IR*CR PDR = planned detection risk AAR = acceptable audit risk IR = inherent risk CR = control risk Problem: Following are six situations that involve the audit risk model as it is used for planning audit evidence requirements in the audit inventory. Situation

Audit Processes

Please describe the relationships between audit risks, the collection of audit evidence, and internal control. Use examples in your discussion.

Subsequent Events Procedures

The period between the balance sheet date and the date of the auditor report is called the subsequent period. Audit procedures performed in this period are called the subsequent events review. The significance of the audit report date is that it is the cutoff point for an auditor's responsibility to be informed about events

Management Responsibilities and Auditors Responsibilities

See attached for the Report of Management. a. What are the purposes of the two reports and who was responsible for writing each? b. What information does the report of management provide to users of financial statements c. Explain the purpose of the audit committee as described in the fourth paragraph of management's rep

Audit: appearance or fact of lack of independence

Marie Janes encounters the following situations in doing the audit of a large auto dealership, Janes is not a partner. Situations as follows: 1. The sales manager tells her that there is a sale (at a substantial discount) on new cars that is limited to long-established customers of the dealership. Because her firm has be

Toxic Waste Disposal Audit Risk Assessment

3.46 Risk Assessment. This question consists of 15 items pertaining to an auditor's risk analysis for a company. Your task is to tell how each item affects overall audit risk?the probability of giving an unqualified audit report on materially misleading financial statements. Bond, CPA, is considering audit risk at the financi

Cost of Bank Loans: evaluating alternatives

UFSU Corporation intends to borrow $450,000 to support its short-term financing requirements during the next year. The company is evaluating its financing options at the bank where it maintains its checking account. The financing alternatives offered by the bank include the following: Alternative 1: A discount interest loa

Partial Strategic Audit - Harley Davidson

Complete the following sections of a Strategic Audit of Harley-Davidson: 1. Analysis of Strategic Factors 2. Strategic Alternatives and Recommended Strategy 3. Implementation 4. Evaluation and Control Objective: Explain the strategic management process within the global environment. Conduct various environ

Tom, an individual taxpayer, has just been audited by the IRS.

Tom, an individual taxpayer, has just been audited by the IRS and, as a result, has been assessed a substantial deficiency (which has not yet been paid) in additional income taxes. In preparing his defense, Tom advances the following possibilities: a. Although a resident of Kentucky, Tom plans to sue in a U.S. District Court in

Tax Treatment, Bad Debt, AGI

33. Sue loaned her sister Janice $10,000 three years ago. Janice has never made any payments to Sue, and Sue has never tried to collect from Janice. This year, Janice filed for bankruptcy and told Sue that she would not be able to repay any of the $10,000 loan. Determine Sue's tax treatment for the loan for the current year.

Audit of Long-Term Debt

Audit of Long-Term Debt The long-term debt working paper (indexed K-1) on attached doc. was prepared by client personnel and audited by AA, an audit assistant, during the calendar year 2006 audit of American Widgets, Inc., a continuing audit client. The engagement supervisor is thoroughly reviewing the working papers. Ove

Audit of Stockholders' Equity - Zeitlow Corporation

A CPA firm is engaged in the examination of the financial statements of Zeitlow Corporation for the year ended December 31, 2006. Zeitlow Corporation?s financial statements and records have never been audited by a CPA. The stockholders? equity section of Zeitlow Corporation?s balance sheet at December 31, 2006, follows: Stoc

Journalize the transactions

On January 1, 2006, Bettendorf Company had Accounts Receivable $56,900 and Allowance for Doubtful Accounts $4,700. Bettendorf Company prepares financial statements annually. During the year the following selected transactions occurred. Jan. 5 Sold $6,900 of merchandise to John Yockey Company, terms n/30. Feb. 2 Accepted

Segregation of auditor duties

The size of an entity can affect the components of internal control. Segregation of duties is a control activity that is important for adequate control. The following example presents a scenario where the auditor can provide assistance to the entity in establishing proper segregation of duties. TameBird Industries produces meals

Effective Rate and Bank Loans

Please help with the following problem. My company needs $300,000 to take a cash discount of 2/10, net 70. A bank will loan the money for 60 days at a total interest cost of $5,500. a. What is the effective rate on the bank loan? b. How much would it cost (as a percentage) I the company did not take the cash discount

Risk and return: Compare two Bank of Tinytown loans

The Bank of Tinytown has two $20,000 loans with the following characteristics: Loan A has an expected return of 10% and a standard deviation of returns of 10%. The expected return and standard deviation of returns for loan B are 12% and 20%, respectively. a) If the covariance between loan A and B is 0.015 (1.5%) what are th

Old Family Bank: Consulting for High Performance

Review the attached document. Questions: - What accounts for any noticeable differences between the two? (1 paragraph) - Are both interpretations valid? Why or why not? (1 to 2 paragraphs) - What action change program would you recommend implementing at the Old Family Bank and why? (1 to 2 paragraphs)

Bank Reconciliation

Prepare the bank reconciliation based on the following information; Bogus Company's cash records for April 2004: CASH RECEIPTS (CR) date cash debit check # cash credit april 2 $4,174 3113 $891 8

Audit Evidence and Conclusions

13-33 (Audit Evidence and Conclusions) The following conclusions were taken from a staff auditor's summary worksheet for fixed assets and the worksheet for prepaid insurance. Audit Conclusions or Situations 1. The choice of eight years for straight-line depreciation of the company's trucks appears unreasonable. I would sugg

Selecting the Proper Audit Opinion and Report Modification)

16-47 (Selecting the Proper Audit Opinion and Report Modification) Required Audit situations 1 through 8 present various independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue, and List B represents the report modificati

THE TROLLEY DODGERS

CASE 3.1 THE TROLLEY DODGERS In 1890, the Brooklyn Trolley Dodgers professional baseball team joined the National League. Over the following years, the Dodgers would have considerable difficulty competing with the other baseball teams in the New York City area. Those teams, principal among them the New York Yankees, were muc

Payroll Audit Procedures, Computers, and Sampling

9.81 Payroll Audit Procedures, Computers, and Sampling. You are the senior auditor in charge of the annual audit of Onward Manufacturing Corporation for the year ending December 31. The company is of medium size, having only 300 employees. All 300 employees are union members paid by the hour at rates set forth in a union contr

Overview and Objectives of Audit Procedures

12-46 (Overview and Objectives of Audit Procedures) The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas. Several deficiencies are noted; they resulted in significant errors not being initially identified. Required For each item listed as follows:

Audit reports and misstatements

1. What are the different types of audit reports and when should each be used? 2. In what types of situations would an auditor be allowed to issue an unqualified audit report? 3. To what extent is the auditor liable for misstatements in the financial statements of the audited company.

Why Auditors Consider Internal Controls of an Organisation

Why do auditors have to consider the internal controls of the organization? What are some key elements of internal control? Which are the most important? How will the auditor have to modify the audit program if the internal controls are deemed inadequate to support management assertions?