Ashford acc410 entire course (auditing) new update versionDocument Transcript
ASHFORD ACC410 Entire Course (Auditing) NEW UPDATE VERSION PLEASE DOWNLOAD HEREInternal vs. External Audit Staffs. Spacecraft, Inc., is a large corporation that isaudited regularly by a public accounting firm but also maintains an internalauditing staff. Explain briefly how the relationship of the public accounting firm toSpacecraft differs from the relationship of the internal auditing staff to Spacecraft.Do not forget to show the necessary steps and explain how you attained thatoutcome. Respond to at least two of your classmates’ postingsAudit Reports. Evaluate the following question: “If a CPA firm completes anonpublic company audit of Adam Company’s financial statements followingIACPA generally accepted auditing standards and is satisfied with the results ofan audit, an unmodified report may be issued. On the other hand, if no audit isperformed of the current year’s financial statements, but the CPA firm hasperformed satisfactory audits in prior years, has confidence in the management ofthe company, and makes a quick review of the current year’s financialstatements, a qualified report may be issued.” Do you agree? Give reasons tosupport your answer. Do not forget to show the necessary steps and explain howyou attained that outcome. Respond to at least two of your classmates’ postings.Generally Accepted Auditing Standards. Complete problem below and submitto your instructor. Write under the generally accepted auditing standards columnthe specific standard that was violated and how the action of Jones resulted in afailure to comply with each standard. Organize your answer as shown below;specifically with a column for the standard that was violated and a column for therequired action. The paper should be 2-3 pages.Problem:John Clinton, owner of Clinton Company, applied for a bank loan and wasinformed by the banker that audited financial statements of the business had tobe submitted before the bank could consider the loan application. Clinton thenretained Arthur Jones, CPA, to perform an audit. Clinton informed Jones thataudited financial statements were required by the bank and that the audit must becompleted within three weeks. Clinton also promised to pay Jones a fixed feeplus a bonus if the bank approved the loan. Jones agreed and accepted theengagement.The first step taken by Jones was to hire two accounting students to conduct theaudit. He spent several hours telling them exactly what to do. Jones told thestudents not to spend time reviewing controls but instead to concentrate onproving the mathematical accuracy of the ledger accounts and summarizing the
data in the accounting records that support Clinton Company’s financialstatements. The students followed Jone’s instructions and after two weeks gaveJones the financial statements, which did not include any notes. Jones reviewedthe statements and prepared an unqualified audit report. The report, however, didnot refer to generally accepted accounting principles.Required:List on the left side of a sheet of paper the generally accepted auditing standardsthat were violated by Jones, and indicate how the actions of Jones resulted in afailure to comply with each standard. Organize your answers asfollows: Generally Accepted Auditing StandardsActions by Jones Resulting in Failure to Comply with Generally AcceptedAuditing StandardsGeneral Standards(1) The auditor must have adequate technical training and proficiency to performthe audit.(1)Balance Sheet Verification. “The best means of verification of cash, inventory,office equipment, and nearly all other assets is a physical count of the units; onlya physical count gives the auditors complete assurance as to the accuracy of theamounts listed on the balance sheet.” Evaluate this statement. Remember tocomplete all parts of the problems. Do not forget to show the necessary steps andexplain how you attained that outcome. Respond to at least two of yourclassmates’ postingsAccounting Principles. Discuss what is meant by the phrase “shopping foraccounting principles.” What mechanisms have served to prevent this practice bymanagement? Remember to complete all parts of the problems. Do not forget toshow the necessary steps and explain how you attained that outcome. Respondto at least two of your classmates’ postings.Analytical Procedures. In a 2-3 page paper, complete the case below andsubmit to instructor. Review the income statement for Uden Supply Company andanswer the following:a. Describe the purpose of analytical procedures performed in the planning stageof the audit.b. Uden Supply has projected its 2004 gross profit at 31% of sales despiteexpectation for some shrinkage in margins. On the basis of Udens operatingperformance in years 2001 - 2003 project your best guess for 2004. Project 2004based on the incremental changes for each line item over the last three years.
c. Uden’s unaudited financial statements for the current year show a 31 percentgross profit rate. Assuming that this represents a misstatement from the amountthat you developed as an expectation, calculate the estimated effect of thismisstatement on net income before taxes for 20X4.d. Indicate whether you believe that the difference calculated in part (c) ismaterial. Explain your answer. (50-100 words).Comparative income statement information for Uden Supply Company ispresented in the accompanying table.UDEN SUPPLY COMPANYComparative Income StatementYears Ended December 20X1, 20X2, and 20X3(Thousands)20X1 Audited20X2 Audited20X3 Audited20X4 ExpectedSales8,7009,40010,100Cost of goods sold6,0006,5007,000Gross profit2,7002,9003,100
606366Supplies262830Utilities212223Legal and accounting343740Miscellaneous121314Interest expense210228240Net income before taxes80
150230Incomes taxes183350Net income62117180Audit Programs. “All experienced auditors would design exactly the same auditprogram for a particular audit engagement.” Do you agree? Explain. Rememberto complete all parts of the problems. Do not forget to show the necessary stepsand explain how you attained that outcome. Respond to at least two of yourclassmates’ postings.Internal Control Procedures. Describe what is meant by a “walk-through.” Mustwalk-throughs be performed during audits of internal control over financialreporting? May the client perform a walk-through and the auditors then review theclient’s work? Remember to complete all parts of the problems. Do not forget toshow the necessary steps and explain how you attained that outcome. Respondto at least two of your classmates’ postings.Internal Control Case. Complete Case 18-37 (p. 724-725) and submit toinstructor. For each of the following independent cases state the highest level ofdeficiency that you believe the circumstances represent--a control deficiency, asignificant deficiency, or a material weakness. Explain your decision in each case.Legal Case. Compare the rights of plaintiffs under common law with the rights ofpersons who purchase securities registered under the Securities Act of 1933 andsustain losses. In your answer, emphasize the issue of who must bear the burdenof proof. Remember to complete all parts of the problems. Do not forget to showthe necessary steps and explain how you attained that outcome. Respond to atleast two of your classmates’ postings.Ethics Case. Harris Fell, CPA and member of the AICPA, was engaged to auditthe financial statements of Wilson Corporation. Fell had half-completed the auditwhen he had a dispute with the management of Wilson Corporation and was
discharged. Hal Compton, CPA, was promptly engaged to replace Fell. WilsonCorporation did not compensate Fell for his work to date; therefore, Fell refusedto allow Wilson Corporation’s management to examine his working papers. Someof the working papers consisted of adjusting journal entries and supportinganalysis. Wilson Corporation’s management had no other source for thisinformation. Did Fell violate the AICPA Code of Professional Conduct? Explainfully. Remember to complete all parts of the problems. Do not forget to show thenecessary steps and explain how you attained that outcome. Respond to at leasttwo of your classmates’ postings.Program Comprehensive Exam. Complete the comprehensive exam, which willtakeapproximately one to two hours and will be graded based on your score. The fullinstructions for the examare posted in the classroom.Audit Reporting. Wade Corporation has been your audit client for several years.At the beginning of the current year, the company changed its method ofinventory valuation from average cost to last in, first out (LIFO). The change,which had been under consideration for some time, was in your opinion a logicaland proper step for the company to take. What effect, if any, will this situationhave on your audit report for the current year? Remember to complete all parts ofthe problems. Do not forget to show the necessary steps and explain how youattained that outcome. Respond to at least two of your classmates’ postings.Audit Reports. The auditors do not believe that certain lease obligations havebeen reflected in conformity with generally accepted accounting principles in theclient’s financial statements. What type of opinion should the auditors issue if theydecide that the exceptions are immaterial? Material?Very material? Remember tocomplete all parts of the problems. Do not forget to show the necessary steps andexplain how you attained that outcome. Respond to at least two of yourclassmates’ postings.Audit Report Modifications. Complete problem below. List a represents thetypes of opinions the auditor ordinarily would issue and List B represents thereport modifications [if any] that would be necessary. Select as the best answerfor each situation [items 1 to 6] the type of opinion and modifications, if any, theauditor would normally select. The types of opinions in List A and the reportmodifications in List B may be selected once, more than once, or not at all. Thepaper should be 2-3 pages.Problem:Items 1 through 6 present various independent factual situations an auditor mightencounter in conducting an audit. For each situation assume:
Assume: The auditor is independent. The auditor previously expressed an unqualified opinion on the prior year’sfinancial statements. Only single-year (not comparative) statements are presented for the currentyear. The conditions for an unqualified opinion exist unless contradicted in the factualsituations. The conditions stated in the factual situations are material.· No report modifications are to be made except in response to the factualsituation.Situations:1. In auditing the long-term investments account, an auditor is unable to obtainaudited financial statements for an investee located in a foreign country. Theauditor concludes that sufficient appropriate audit evidence regarding thisinvestment cannot be obtained.2. Due to recurring operating losses and working capital deficiencies, an auditorhas substantial doubt about an entity’s ability to continue as a going concern for areasonable period of time. However, the financial statement disclosuresconcerning these matters are adequate.3. A principal auditor decides to take responsibility for the work of another CPAwho audited a wholly owned subsidiary of the entity and issued an unqualifiedopinion. The total assets and revenues of the subsidiary represent 17 percent and18 percent, respectively, for the total assets and revenues of the entity beingaudited.4. An entity issues financial statements that present financial position and resultsof operations but omits the related statement of cash flows. Managementdiscloses in the notes to the financial statements that it does not believe thatstatement of cash flows to be a useful financial statement.5. An entity changes its depreciation method for production equipment fromstraight-line to a units-of-production method based on hours of utilization. Theauditor concurs with the change, although it has a material effect on thecomparability of the entity’s financial statements.
6. An entity discloses certain lease obligations in the notes to the financialstatements. The auditor believes that the failure to capitalize these leases is adeparture from generally accepted accounting principles.Required:List A represents the types of opinions the auditor ordinarily would issue and ListB represents the report modifications (if any) that would be necessary. Select asthe best answer for each situation (items 1 through 6) the type of opinion andmodifications, if any, the auditor would normally select. The types of opinions inList A and the report modifications in List B may be selected once, more thanonce, or not at all.(AICPA, adapted) List AList BTypes of OpinionsReport ModificationsA. An "except for" qualified opinionH. Describe the circumstances in a explanatory paragraph preceding the opinionparagraph without modifying the three standard paragraphs.B. An unqualified opinionI. Describe the circumstances in an explanatory paragraph following the opinionparagraph without modifying the three standard paragraphs.C. An adverse opinionJ. Describe the circumstances in an explanatory paragraph preceding the opinionparagraph, and modify the opinion paragraph.D. A disclaimer of opinionK. Describe the circumstances in an explanatory paragraph following the opinionparagraph, and modify the opinion paragraph.E. Either an "except for" qualified opinion or an adverse opinion.L. Describe the circumstances in an explanatory paragraph preceding the opinionparagraph, and modify the scope and opinion paragraphs.F. Either a disclaimer of opinion or an "except for" qualified opinion.
M. Describe the circumstances in an explanatory paragraph following the opinionparagraph, and modify the scope and opinion paragraphs.G. Either an adverse opinion or a disclaimer of opinionN. Describe the circumstances within the scope paragraph without adding anexplanatory paragraph.O. Describe the circumstances within the opinion paragraph without adding anexplanatory paragraph.P. Describe the circumstances within the scope and opinion paragraphs withoutadding an explanatory paragraph.The final paper will be based on Appendix 6C Illustrative Audit Case: KeystoneComputers at pages 237-244 in your text. Write, in outline format but in completesentences, a 6 to 10 page audit plan. It is recommended that you look at Figure18.8 on page 708, which shows the control objectives related to accountsreceivable.In your audit plan cover the steps necessary to determine if you should select theclient, the internal control procedures which need to be reviewed, the substantivetests [using accounts receivable a guide], and the final reporting steps. Based onthe actual facts in the case determine the emphasis you want to place on variousaccounts. Also reflect back over your entire accounting program and think abouthow the accounts are interrelated. For example, when allowance for doubtfulaccounts is credited the offset is to bad debt expense. Therefore one of the stepsshould be to trace the debit side of the entry to the balance for bad debt expense.Make your comments as specific as possible. Rather than say look for unusualentries, say look for entries from unusual sources and rounded amounts withfocus on those near an accounting cut off. Use precise language. Rather thansaying you “vouched accounts payable,” say that you looked at the item todetermine that it was a bona fide business expense. Remember to focus on thekey audit objectives and support needed after applying the audit risk model.Remember, the purpose of the Final Paper is for you to culminate the learningachieved in the course by describing your understanding and application ofknowledge in the field of accounting.The Final Paper should focus on real life, real time application of topics coveredin this course; the uses you have seen and the uses you can envision. The papermust be submitted to your instructor no later than the last day of class.Earliersubmittalisappreciated.