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
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Please describe the relationships between audit risks, the collection of audit evidence, and internal control. Use examples in your discussion.
Audit Program for Cash including objectives and procedures for a comprehensive audit of cash accounts.
The audit program for cash contains a statement of the audit objectives, the complete and detailed procedures, and a conclusion. It is adapted from PPC, a division of Thompson Publishing.
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
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
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
A firm has forecasted sales of $4,000 in January, $6,000 in February and $5,500 in March. All sales are on credit. 40% is collected the month of sale and the remainder the following month. How much is collected from accounts receivable in February? A) $5,400 B) $4,000 C) $6,000 D) $3,000
ABC Co. has an average collection period of 60 days. Total credit sales for the year were $3,000,000. What is the balance in accounts receivable at year-end? A) $50,000 B) $100,000 C) $500,000 D) $80,000
1. At which point in an ordinary sales transaction of a wholesaling business would a lack of specific authorization be of least concern to the auditor in the conduct of an audit? A. Granting of credit. B. Selling of goods for cash. C. Shipment of goods. D. Determination of discounts. 2. Which of the following is most like
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
In June, the Sunbelt Company utilizes direct sends for which its bank charges fees of $100. The bank's earned credit ratio and reserve requirement are 5% and 12%, respectively. What is the minimum balance required to compensate the bank for the June fees?
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
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
Question: At the end of 2007 Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2008, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off. Questions: (a) Prepare the jour
WRITE AN AUDIT APPROACH FOR THESE TWO PROBLEMS 6.47 Employee Embezzlement via Cash Receipts and Payment of Personal Expenses. This case is designed like the ones in the chapter. They give the problem, the method, the audit trail, and the amount. In this case, you can assume you have received the informant's message. Your a
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
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 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
Select a well-known bank. Select an emerging technology at the company (perhaps something like smart cards, teller-less banks or anything) and prepare a proposal to justify the need for this new technology in the organization. At a minimum, discuss what the technology is and how it works, benefits it will provide, and any potent
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
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
Sammy had the following for last year: Salary $40,000 Short-term Capital gain $3000 nonbusiness bad debt ($10,000) for the current year: salary $45000 nonbusiness bad debt ($1000) collection of last years bad debt $10,000 Calculate her AGI for the current year
The Acme Company is exploring many strategic options. Whichever global business strategy the Acme Company eventually chooses, the firm inevitably will require the services of a bank to help manage its working capital. Many major multinational banks provide a variety of working capital and multinational cash management services.
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
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 modifications
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
16-41 (Choosing the Type of Opinion) Several independent audit situations are presented here. Assume that everything other than what is described would have resulted in an unqualified opinion. Required Indicate the type of opinion you believe should be expressed in each situation, and explain your choice. If an explanatory
If the sales each month average $150,000, determine how much the company expects to receive of this amount. How much will become bad debts?
A study of accounts receivable at the A& Department Store indicates that bills are either current, one month overdue, two months overdue, written off as bad debts, or paid in full. Of those that are current, 80% are paid that month, and the rest become one month overdue. Of the one month overdue bills, 90% are paid, and the rest
FM Company has cash that has been frozen in a bank in Cuba. Should this cash be classified as a current asset?
FM Company has cash that has been frozen in a bank in Cuba. Should this cash be classified as a current asset? Discuss. Kimbal Company has invested funds in a supplier to help ensure a steady supply of needed materials. Would this investment be classified as a marketable security (current asset)?
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