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Auditing

Lakeside Company: Why a nonpublic company would require an audit

The Lakeside Company: Analysis of a Potential Audit Client a. Why would the owner of Lakeside as well as the company's banks require that an independent CPA firm perform an annual audit? b. This case implies that no auditor with the firm of Abernethy and Chapman has an in-depth understanding of the consumer electronics indus

Modified Audit Report: Level of Materiality and Alternatives

The following independent situations, assume that you are the audit partner on the engagement: 1. In the last 3 months of the current year, Oil Refining Company decided to change direction and go significantly into the oil drilling business. Management recognizes that this business is exceptionally risky and could jeopardize

EU audit reform 2013

The framework of EU audit reform was agreed in December 2013. The general objective of the EU's audit reform is to 'Contribute to the efficient functioning of financial and non-financial markets by strengthening the market role of the audit profession to provide relevant economic agents and the market with more reliable, tran

Importance of sampling

Why is sampling so important? Some people have argued that sampling is not beneficial, because important aspects of the population may be omitted. Do you agree or disagree with that line of thinking?

What should auditors do if their evidence is questioned?

What should auditors do if their evidence is questioned? If someone thinks that the evidence is actually NOT persuasive and that the conclusions are inaccurate, what should the auditor do? How should that situation be handled?

Conflict of Interest: Audit Firms and Clients

Do you believe that a public accounting company can be truly independent if they are being paid by the client to audit the financial statements? Or is there an inherent conflict of interest in such an arrangement? Is there a better way to pay the auditors?

Auditing: Material weakness, internal audit, change in control risk

1. Fisher, Inc. is a large corporation that is regularly audited by a public accounting firm. Fisher, Inc. also maintains an internal auditing staff. Which do you think matters more to Fisher's board of directors: internal or external auditing? Why do you think so? Which do you think matters more to Fisher's stockholders: inte

Auditor reports practice exam questions

50. An explanation of reliance on the reports of other auditors is an illustration of report departures referred to as A. Qualifications. B. Divisions of responsibility. C. Expansions of scope. D. Scope limitations. 1. If management fails to provide adequate justification for a change from one generally accepted accounti

Investment Cycle

Describe the typical documents and controls present in the finance and investment cycle.

Subsequent Events

Subsequent Event - Internet Exercise. The following subsequent event was disclosed in Dole Food Company's 2009 annual report: Note 24: Subsequent Event On February 27,2010, A significant earthquake struck the country of Chile. Although Dole's Chilean operations resumed business after the earthquake in matter of days, Dole's

Audit situations: written representation needed?

For each of these, indicate whether you would include in written representations for (1) all audits, (2) audits of public entities (under AS 5), or (3) not included in written representations. a. Management acknowledgements its responsibility for the fairness of the financial statements in accordance with a reporting framewor

Auditing

Case analysis: Innovation Corrupted: The Rise and Fall of Enron (A) Required for the Analysis of a Case Study: Look more closely at Enron and why a big company that was so successful collapsed so quickly. In your observation, look at internal policies as well as the role of the external auditors. What weaknesses or strength

The Internal Control Component for Control Procedures

Which of the following describes the internal control component "control procedures"? A: Company must identify its risks. B: Internal auditors monitor company controls to safeguard assets, and external auditors monitor the controls to ensure that the accounting records are accurate. C: Control procedures are the "tone at the

Apollo Shoes Audit: SAS 99 Memo Planning Phase

Apollo Shoes SAS 99 Memo General Planning 5. Obtain an understanding of the company, its internal control, and its audit risk factors (including the risk of material misstatements due to fraud). a. Hold a discussion among engagement team members about the risks of material misstatements due to fraud. Document the discussio

Auditing study questions

1. The completeness assertion would be violated if a. disclosure in the statements of pledged receivables was inadequate. b. fictitious sales transactions were included in accounts receivable. c. the allowance for doubtful accounts was understated. d. unbilled shipments occurred during the period. 2. The rights and obligati

Assessing control risk, internal controls, and analytical procedures

8-15 (Analytical procedures) In audit planning the audit of Construction Industry Resources, Inc., a building supply company. You have completed analytic procedures relevant to purchases and inventory. The results of these procedures are included in Figure 8.13. Figure 8.13. Selected Financial Information ($000) (see attac

6-21 audit evidence: evaluating inquiry and oral evidence

6-21 (Audit evidence) In an audit of financial statements, an auditor must judge the validity of the audit evidence obtained. Required a) In the course of an audit, the auditor asks many questions of client officers and employees. Describe the factors that the auditor should consider in evaluating inquiry and oral eviden

5-29 Assertions in the Inventory Audit

Financial Statement Assertions: Inventory For each, indicate the assertion: 1. Inventories are properly at the lower of cost or market. 2. Inventories in the warehouse on the balance sheet date are all reported. 3. Inventory includes all items on hand. 4. Liens are disclosed in footnotes. 5. The client has legal title

5-30 identify the audit assertions for each issue below

What assertion is related to each issue? 1. The allowance for doubtful accounts is a fair amount. 2. All liabilities owed as of year end are included in the financial statements. 3. All purchase returns are valid. 4. Purchases during the last week of the year might be recorded after year end. 5. Accounts receivable has be

6-22 Classify the four types of audit evidence

Classify by type of audit evidence: (1) directly from outsiders, (2) indirectly from outsiders, (3) internal but validated externally, and (4) entirely internal. 1. Bank statement sent directly to the auditor by the bank. 2. Bank statement obtained from client's files. 3. Vendor invoice in client's unpaid voucher file. 4.

Audit evidence: Validity of sources of evidence

6-20 (Audit evidence) The third GAAS of field work requires that the auditor obtain sufficient competent audit evidence to afford a reasonable basis for an opinion regarding the financial statements under audit. In considering what constitutes sufficient competent evidential matter, a distinction should be made between underly

Audit Evidence and Assertions

5-29 (Assertions) In planning the audit of a client's inventory, an auditor identified the following issues that need audit attention. 1. Inventories are properly stated at the lower of cost or market. 2. Inventories included in the balance sheet are present in the warehouse on the balance sheet date. 3. Inventory quantit

Auditing 18.1: Wabash Company

When you are first retained to audit the financial statements of Wabash Company, you inquire whether a budget is used to control costs and expenses. The controller, James Lowe, replies that he personally prepares such a budget each year, but that he regards it as a highly- confidential document. He states that you may refer to i

Percent of accounts receivable method

At each calendar year-end mazie supply co. uses the percent of account receivable method to estimate bad debits. On December31,2013 it has outstanding accounts receivable of 55000 and estimated that 2% will be uncollectible . prepare the adjusting entry to record bad credit expense for the year 2013 under the assumption that the

Bank Reconciliation and Balances

You have received the bank statement for your company's account and need to reconcile it with your cash T-account. Your records show an ending balance for the month of $12,722.40 while the bank's records show an ending balance of $12,367.16. The bank charged $8 in service fees and paid $26.05 in interest. All but three checks w

Latin America's First Commercial Microfinance Bank

Please review the following videos and a summary. http://www.youtube.com/watch?v=DzUpsVt-kIE&list=FLRIzS13eyYurKB4T7ai8DLw&index=2&feature=plpp_video and http://www.youtube.com/watch?v=7xni1X9cO28&list=FLRIzS13eyYurKB4T7ai8DLw&index=3&feature=plpp_video.

Analysis of a bank from the perspective of an investor

Take a good look at the bank you use, not from the point of view of a customer but from the point of view of a potential investor. Consider both the development of 'money' from coins and notes to checks to credit cards to electronic transfer of funds, present and future interest rates, possible developments on the 'inflation fro