It is common for an entity to have transactions with related entities?some of which are fully owned, some of which share common ownership, but are not otherwise related, and others where ownership is small but there is control. Required: a. Define related entity transactions and describe the appropriate accounting for relat
32. After the fieldwork is completed, a partner of the CPA firm who has not been involved in the audit performs a second-partner documentation review. This second review usually focuses on A) The fair presentation of the financial statements in conformity with GAAP. B) Irregularities involving the client's management and
13. For effective internal control, the accounts payable department generally should a. Stamp, perforate, or otherwise cancel supporting documentation after payment is mailed. b. Ascertain that each requisition is approved as to price, quantity, and quality by an authorized employee. c. Obliterate the quantity ordered on the
Knowing that my company 2007 audit will include attestation services, I want to know more about what attestation services encompass and what my team and I can do to prepare for this service. Brainstorm with the auditing department about these: What are attestation services? What may I request from the CPA firm in regard
The privately owned company that you work for has been awarded a contract that will require submission of the company's audited financial statements. The owner of the company is not familiar with audits and audited financial statements. As the Controller, prepare a 700-1,050-word report to the owner explaining the work of indepe
In a discussion between Peters and Ferrel, Two auditing students, Peters made the following statement: "A CPA is a professional person who is licensed by the state for the purpose of providing an independent expert opinion on the fairness of financial statements. To maintain an attitude of mental independence and objectivity in
Please help with the following problem about auditing. Provide at least 200 words in the solution. How does the auditor determine materiality? Will materiality be the same for all auditors? Why or why not?
16-38) In connection with an audit of the financial statements of Olympia Company, the auditors are reviewing procedures for accumulating direct labor-hours. They learn that all production is by job order and that all employees are paid hourly wages, with time and a half for overtime hours. Olympia's direct labor-hour input p
12-22) At the beginning of your audit of Crestview Manufacturing Company's financial statements for the year ended December 31, 200X, the company president confides in you that Henry Ward, an employee, is living on a scale in excess of that which his salary would support. The employee has been a buyer in the purchasing departm
Objective: Evaluate Results Mel Adams is a partner in a medium-sized CPA firm and takes an active part in the conduct of every audit he supervises. He follows the practice of reviewing all audit files of subordinates as soon as it is convenient, rather than waiting until the end of the audit. When the audit is nearly finis
Design & Perform Analytical Procedures for accounts in the sale & collection cycle. Johnson Clock Company sells specialty clocks, watches, and other time-keeping devices. Since its inception, the company hjas sold items through its home office store and at industry and collector trade shows around the country. To meet the
Select representative samples. a) In each of the following independent problems, design an unbiased random sampling plan, using an electronic spreadsheet or a random number generator program. The plan should include defining the sampling unit and establishing a numbering system for the population. After the plan has been de
The following are selected transaction-related audit objectives and audit procedures for sales transactions: Transaction-Related Audit 0bjectives 1. Recorded sales exist. 2. Existing sales are recorded. 3. Sales transactions are properly included in the accounts receivable master file and are correctly summarized. Proce
Your audit firm is auditing your client Jo-Jo Jolly Products. The company is a small regional manufacturing firm located in Rye, New York. The company manufactures and sells crayons and pencils directly to retail stores. Your firm is auditing the financial statements of this company as of the year ended December 31, 2006. Du
1. Immediately upon receipt of cash, a responsible employee should a. Record the amount in the cash receipts journal. b. Prepare a remittance listing. c. Update the subsidiary accounts receivable records. d. Prepare a deposit slip in triplicate. 2. Upon receipt of customers' checks in the mail room, a responsible empl
Nova Land Development Corporation is a closely held corporation engaged in purchasing large tracts of land, subdividing the tracts, and installing paved streets and utilities. The Corporation does not construct buildings for the buyers of the land and does not have any affiliated construction companies. Undeveloped land usually
You have been engaged by the management of Alden, Inc., to review its controls over the purchase, receipt, storage, and issue of raw materials. You have prepared the following comments, which describe Alden's procedures. 1) Raw materials, which consist mainly of high-cost electronic components, are kept in a locked storeroom.
Ace Corporation does not conduct a complete annual physical count of purchased parts and supplies in its principal warehouse, but uses statistical sampling instead to estimate the year-end inventory. Ace maintains a perpetual inventory record of parts and supplies and believes that statistical sampling is highly effective in det
SECTION III: YRS, Incorporated Balance Sheet Year Ended December 31, 2006 Cash 100 Accounts Receivable 200 Total Assets 300 Accounts Payable 150 Capital Stock 100 Total 250 YRS Incorporated Income Statement for the Period ending December 31, 2006 Net Sales 500 Cost of Goods sold 10
If a company's control risk is low, the auditor needs to gather evidence on the operating effectiveness of the controls. Required a. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness. b. Briefly indicate the audit implication; that is,
Payroll Tests of Controls. See attached file for full problem description. The diagram describes several payroll tests of controls. It shows the direction of the tests, leading from samples of clock cards, payrolls, and cumulative year-to-date earnings records to blank squares. For each blank square, write a payroll test o
1) How do you evaluate the results of a test of control? 2) Should sampling be applied to all audit procedures? Why or why not? 3) How do sampling results affect an audit conclusion?
Suppose you selected a sample of customers' accounts receivable and wanted to find supporting evidence for the entries in the accounts. Where would you go to vouch the debit entries? What would you expect to find? Where would you go to vouch the credit entries? What would you expect to find?
What account balances are included in a revenue and collection cycle? What specific control procedures should be in place and operating in internal control governing revenue recognition and cash accounting? What assertions are made about classes of transactions and events in the revenue and collection cycle?
What are the common errors and frauds in the personnel and payroll cycle? Which control characteristic are auditors looking for to prevent or detect these errors and frauds? What features of the payroll system could be expected to prevent or detect payment of a fictitious employee? What about the omission of payment t
Assessing Controls Assume that you were given these five options to describe the tone at the top: ? Excellent ? Moderate ? Indifferent ? Nonexistent ? Machiavellian (do whatever it takes) Required a. How would the auditor go about assessing which of the terms best describes the tone at the top? b. What effect would eac
What is meant by professional skepticism? Can you think of a situation where the evidence says one thing but your gut tells you something else?
It is common for an entity to have transactions with related entities? Some of which are fully owned, some of which share common ownership, but are not otherwise related, and others where ownership is small but there is control. Tyco is a conglomerate organization that had $36 billion in revenue. In a court trial, it was allege
1. The natural sign of an asset is a: a. Debit b. Credit c. Both d. None 2. Internal Auditors are referred to as independent auditors. a. True b. False c. Neither 3. The three categories for standards for auditors as set forth by GAAS are general standards, standards of fieldwork, and standards of examination. a. T
Four multiple questions related to auditing. 1. Which of the following is least likely to be appropriate as the basis for determining the preliminary judgment about materiality in the audit of a set of financial statement? a. Net income before taxes. b. Current assets c. Owners' equity d. Inventory 2. Which of the fo