The document provides information for the audit of EastJet, a small airline, by Carter & McLean accounting firm. It includes EastJet's interim financial statements, notes from an audit planning meeting, and notes on work done by a junior auditor on accounts receivable and property, plant, and equipment. The financial statements show a decrease in profit for the first six months of the year. Notes from the meeting indicate issues with two customers going bankrupt, a damaged plane, and plans to lease additional planes. The junior auditor's work on accounts receivable and property failed to address several issues but concluded the accounts were fairly stated.

1. Title
ABC/123 Version X
1
Week One Practice Problems
PSY/315 Version 4
1
University of Phoenix MaterialWeek One Practice Problems
Prepare a written response to the following questions.
Chapter 1
12. Explain and give an example for each of the following types
of variables:
a. Equal interval:
b. Rank-order:
c. Nominal:
d. Ratio scale:
e. Continuous:
f. Discrete:
15. Following are the speeds of 40 cars clocked by radar on a
particular road in a 35-mph zone on a particular afternoon:
30, 36, 42, 36, 30, 52, 36, 34, 36, 33, 30, 32, 35, 32, 37, 34, 36,
31, 35, 20

2. 24, 46, 23, 31, 32, 45, 34, 37, 28, 40, 34, 38, 40, 52, 31, 33, 15,
27, 36, 40
Make a frequency table and a histogram, then describe the
general shape of the distribution.
21. Raskauskas and Stoltz (2007) asked a group of 84
adolescents about their involvement in traditional and electronic
bullying. The researchers defined electronic bullying as “…a
means of bullying in which peers use electronics {such as text
messages, emails, and defaming Web sites} to taunt, threaten,
harass, and/or intimidate a peer” (p.565). The table below is a
frequency table showing the adolescents’ reported incidence of
being victims or perpetrators or traditional and electronic
bullying.
a. Using this table as an example, explain the idea of a
frequency table to a person who has never had a course in
statistics.
b. Explain the general meaning of the pattern of results.
Incidence of Traditional and Electronic Bullying and
Victimization (N=84)
Forms of Bullying
N
%
Electronic victims
41
48.8
Text-message victim
27
32.1
Internet victim (websites, chatrooms)

3. 13
15.5
Picture-phone victim
8
9.5
Traditional Victims
60
71.4
Physical victim
38
45.2
Teasing victim
50
59.5
Rumors victim
32
38.6
Exclusion victim
30
50
Electronic Bullies
18
21.4
Text-message bully
18
21.4
Internet bully
11
13.1

4. Traditional Bullies
5
64.3
Physical bully
29
34.5
Teasing bully
38
45.2
Rumor bully
22
26.2
Exclusion bully
35
41.7
22. Kärnä and colleagues (2013) tested the effects of a new
antibullying program, called KiVa, among students in grades 1–
3 and grades 7–9 in 147 schools in Finland. The schools were
randomly assigned to receive the new antibullying program or
no program. At the beginning, middle, and end of the school
year, all of the students completed a number of questionnaires,
which included the following two questions: “How often have
you been bullied at school in the last couple of months?” and
“How often have you bullied others at school in the last couple
of months?” The table below is a frequency table that shows
students’ responses to these two questions at the end of the
school year (referred to as “Wave 3” in the title of the table).
Note that the table shows the results combined for all of the
students in the study. In the table, “victimization” refers to
students’ reports of being bullied and “bullying” is students’
reports of bullying other students.

5. a. Using this table as an example, explain the idea of a
frequency table to a person who has never had a course in
statistics.
b. Explain the general meaning of the pattern of results. (You
may be interested to know that the KiVa program successfully
reduced victimization and bullying among students in grades 1–
3 but the results were mixed with regards to the effectiveness of
the program among those in grades 7–9.).
Frequencies of Responses in the Five Categories of the Self-
Reported Bullying and Victimization Variables at Wave 3
Grades 1–3
Grades 7–9
Victimization
Bullying
Victimization
Bullying
Variable
Freq.
%
Freq.
%
Freq.
%

6. Freq.
%
Occurrence
Not at all
3,203
53.6
4,296
72
10,660
77.4
10,880
79.5
Only once or twice
1,745
29.2
1,333
22.3
2,031

7. 14.7
1,987
14.5
2 or 3 times a month
446
7.5
197
3.3
402
2.9
344
2.5
About once a week
297
5
90
1.5
312
2.3
196
1.4
Several times a week
281
4.7
49

8. 0.8
375
2.7
279
2
Participants
Respondents n
5,972
100
5,965
100
13,780
100
13,686
100
Missing n
955

9. 962
2,723
2,817
Total N
6,927
6,927
16,503
16,503
References

10. Copyright ©2013 by Pearson Education, Inc. All rights
reserved. Used with permission.
Copyright © XXXX by University of Phoenix. All rights
reserved.
Copyright © 2014 by University of Phoenix. All rights reserved.
Auditing Project Fall 2014
Do Not Copy
Auditing Project Due December 2nd
Carter & McLean, a Halifax accounting firm, has just taken on
the audit of EastJet, a small
airline providing private charter service that began operations in
2005. The airline is owned by
Dave Wilson and Ron Joyce. The previous auditor has resigned
because of poor health. You are
an audit senior with Carter & McLean and have been asked to
work on the audit.
EastJet uses rented facilities at Halifax International airport. It
has purchased three of its
airplanes and is leasing six other planes. It employs six pilots
full time and has a database of
pilots that can be called if additional flights are required at any
given time.

11. EastJet has done well since it began operations but Carter and
McLean are concerned about the
profit for the first six months of this year. In addition, two of
EastJet’s planes have been
grounded because of faulty electrical connections. The warranty
has expired on these planes.
You held an audit planning meeting with Dave Wilson, Ron
Joyce and Bill Carter, the partner.
You were provided with the interim financial statements for the
first six months of the current
year along with the prior year audited statements (Appendix 1).
Your notes for the meeting are in
Appendix 2.
A junior accountant from your office has done work on the
accounts receivables and property
plant and equipment. The work done is documented in Appendix
3.
Required:
1. Perform the planning analytical review for the financial
statements of EastJet, analyzing
the key movements. Include supporting calculations. (10 marks)

12. 2. Using the audit notes that you took, identify the audit risks
and explain how each audit
risk could result in a material misstatement in the financial
statements. Design the audit
approach for each significant audit risk identified. Present your
answer in a table with
column one identifying the risk and column two explaining the
risk. (20 marks)
3. Calculate planning materiality for the 2014 fiscal year-end
audit. Provide both
quantitative and qualitative analysis supporting your figure for
preliminary materiality. (5
marks)
4. Evaluate the audit work done by the audit junior on the
accounts receivable and property
plant and equipment and outline additional procedures that
should be performed by the
audit team on future work in this area.(20 marks)
Auditing Project Fall 2014
Do Not Copy
5. Prepare the property, plant and equipment (PPE) audit
program that will be used by

13. Carter & McLean accounting for the December 31, 2014, fiscal
year-end audit of EastJet.
(20 Marks)
6. Discuss the importance of documentation in the audit file and
identify which parts of the
audit file require documentation.(10 marks)
7. Assume the 2014 fiscal year-end audit of EastJet is
completed and that Carter and
McLean Accounting has determined that the financial
statements of EastJet are presented
fairly, in all material respects, except for the area of capital
leases. Capital leases are
material. Your audit work indicated the two capital leases
should be accounted for as
capital leases; however, EastJet did not want to do this. The
amount is material but not
pervasive to the financial statements. Draft the expected audit
report that will be issued
by Carter and Mclean Accounting for this engagement. Assume
that the financial
statements of EastJet are prepared under one of the two general
purpose accounting
frameworks used in Canada.(15 marks)

14. Auditing Project Fall 2014
Do Not Copy
Appendix 1: Extracts from management financial statements
Income statement Extracts
Notes Six months ended
June 30, 2014
Year ended December

15. 31, 2013
Revenue 1 549,330 856,852
Operating Expenses 2 489,403 762,722
Other income and expense 3 (4,113) (8,872)
Income before tax 55,814 85,258
Notes:
1. Revenue is evenly spread throughout the year.
2. Operating expenses include repairs and maintenance expense
of property, plant and
equipment of 205,250 for the six months ended June 30, 2014
and 239,250 for the year
ended December 31, 2013.
3. The amount for the six months ended June 30, 2014 includes
a loss on disposition of
equipment. Proceeds on sale of equipment was $30,000.

16. Auditing Project Fall 2014
Do Not Copy
Balance Sheet Extracts
Notes As at June 30, 2014 As at December 31, 2013
Assets
Current Assets
Cash and cash equivalents 157,075 352,049
Accounts Receivables 33,316 25,450
Inventory 9,180 8,898
Non-current assets

17. Property, plant and equipment 1 621,934 491,400
Goodwill 2 12,702 12,702
Total Assets 1,035,866 936,654
Liabilities and shareholders’
equity
Current liabilities
Accounts Payable 135,792 115,000
Advance ticket sales 3 137,755 115,236
Non-current liabilities
Long-term debt 172,300 143,535
Maintenance provision 4 35,600 36,414
Total Liabilities 638,406 568,576
Shareholders’ equity
Share capital 17,500 17,500
Retained earnings 5 229,198 198,324

18. Total liabilities and shareholders’
equity
1,035,866 936,654
Auditing Project Fall 2014
Do Not Copy
Notes to Financial Statements
1. Property, plant and equipment
Six months ended June
30, 2014
Year ended December
31, 2013
Cost
Opening 810,909 815,908

19. Additions 205,000 173,482
Disposals 39,817 178,481
Closing 976,092 810,909
Accumulated Depreciation
Opening 319,509 259,674
Depreciation expenses 74,466 134,835
Disposals 39,817 75,000
Closing 354,158 319,509
Net Book Value 621,934 491,400
2. Intangible asset - goodwill
Goodwill is stated at a cost of $12,702, and no impairment has
been made to date.
3. Advance ticket sales relate to flights that have been booked
for future dates.
4. Maintenance provision represents amounts accrued for leased
planes that have been
returned at the end of the lease. The planes must be in a specific

20. condition or the
company is charged the costs to bring the plane to the required
condition.
5. Dividends paid during the six months to June 30, 2014
amounted to $37,053.
Auditing Project Fall 2014
Do Not Copy
Appendix 2: Notes from meeting
Dave Wilson and Ron Joyce explained that EastJet operates in a
very competitive environment.
The economic downturn has resulted in fewer charter flights and
airlines have been offering
reduced rates to remain competitive. EastJet has been paying
strict attention to cost controls and
have introduced a bonus for management that is based on the
company’s profitability.
Recently two of EastJet’s major customers have gone into

21. bankruptcy. There is $55,000 in
advanced ticket sales related to these customers.
EastJet held a manager’s retreat last month to think of ways to
boost the business. The company
intends on offering an exclusive business class service for
business customers such that they can
fly to and from a major city in the same day. This service will
begin in the new year. EastJet is
optimistic that there will be an 80% uptake of seats on these
flights that will be offered from
Monday through Friday.
One of EastJet’s planes was damaged as a result of a fire in the
cockpit. Although the plane was
insured the insurance company is disputing the claim because
the company did not meet safety
standards that were required in the industry. The cost of the
damage is estimated at $140,000.
Because EastJet is anticipating additional flights in the new
year, it will need to lease or purchase
additional planes. EastJet has begun discussions with a leasing
company in regards to leasing the
planes. They expect the leasing agreements to be in place by
year end.

22. Auditing Project Fall 2014
Do Not Copy
Appendix 3: Notes regarding the accounts receivable and
property, plant and equipment
work performed by the junior auditor.
Accounts Receivables / Unearned Revenue
When clients book charter flights, the flight is prepaid and the
amounts are recorded in unearned
revenue. Once the service has been provided (the client takes
the flight) the unearned revenue
related to the flight is transferred to revenue.
Large well established clients do not have to prepay and are
invoiced for the amounts of the

23. flights. These represent the accounts receivable amounts on the
balance sheet. The prior year
audit file indicates there were issues with accounts receivables
in prior years - Eastjet had
accounted for unearned revenue as accounts receivable.
The junior accountant performed analytical review on the
accounts receivable noting that
percentage of accounts receivable as a percentage of total assets
was consistent with the prior
year. There were several credit balances in accounts receivable
which the junior ignored. No
confirmations of accounts receivable were performed. The
junior auditor concluded the accounts
receivable were fairly stated for the interim period.
Property Plant and Equipment
Property plant and equipment represents the largest item on the
balance sheet and represents the
planes that Eastjet owns as well as leased planes. They are
separated in the general ledger
accounts. The junior auditor traced each item on the subsidiary
ledger to the original invoice,
added the subsidiary ledger and agreed the total to the general
ledger. Then the junior auditor

24. signed the working paper concluding that property plant and
equipment was fairly stated for the
interim period.