AC 410 Entire Course New

AC 410 Unit 1 Homework Assignment NEW
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1–20
Public accounting firms are sometimes grouped into
categories of local firms, regional firms, national firms,
and international firms. Explain briefly the
characteristics of each. Include in your answer the types
of services stressed in each group.
1–26
The Sarbanes-Oxley Act of 2002 created the Public
Company Accounting Oversight Board. Explain the
major responsibilities of this board.
2–7

Evaluate the following quotation: “If a CPA firm
completes a nonpublic company audit of Adam
Company’s financial statements following AICPA
generally accepted auditing standards and is satisfied
with the results of the audit, an unmodified audit report
may be issued. On the other hand, if no audit is
performed of the current year’s financial statements,
but the CPA firm has performed satisfactory audits in
prior years, has confidence in the management of the
company, and makes a quick review of the current
year’s financial statements, a qualified report may be
issued.”
Do you agree? Give reasons to support your answer.
2–28
Reed, CPA, accepted an engagement to audit the
financial statements of Smith Company. Reed’s
discussions with Smith’s new management and the
predecessor auditor indicated the possibility that
Smith’s financial statements may be misstated due to the
possible occurrence of errors, fraud, and illegal acts.
a.Identify and describe Reed’s responsibilities to detect
Smith’s errors and fraud. Do not identify specific audit
procedures.
b.Describe Reed’s responsibilities to detect Smith’s
material noncompliance with laws. Do not identify
specific audit procedures.
c. Identify and describe Reed’s responsibilities to report
Smith’s noncompliance with laws.

AC 410 Unit 2 Homework Assignment
3-31
Ron Barber, CPA, is auditing the financial statements of
DGF, Inc., a publicly held company. During the course of
the audit, Barber discovered that DGF has been making
illegal bribes to foreign government officials to obtain
business, and he reported the matter to senior
management and the board of directors of DGF.
Required:
If management and the board of directors take
appropriate remedial action, should Barber be required
to report the matter outside the company?
Describe Barber's appropriate response if management

and the board of directors fail to take appropriate
remedial action.
3-43
Thomas Gilbert and Susan Bradley formed a
professional corporation called “Financial Services Inc.
—A Professional Corporation,” each taking 50 percent of
the authorized common stock. Gilbert is a CPA and a
member of the AICPA. Bradley is a CPCU (Chartered
Property Casualty Underwriter). The corporation
performs auditing and tax services under Gilbert's
direction and insurance services under Bradley's
supervision.
One of the corporation's first audit clients was
Grandtime Company. Grandtime had total assets of
$600,000 and total liabilities of $270,000. In the course
of his examination, Gilbert found that Grandtime's
building with a carrying value of $240,000 was pledged
as collateral for a 10-year term note in the amount of
$200,000. The client's financial statements did not
mention that the building was pledged as collateral for
the 10-year term note. However, as the failure to
disclose the lien did not affect either the value of the
assets or the amount of the liabilities, and his
examination was satisfactory in all other respects,
Gilbert rendered an unqualified opinion on Grandtime's
financial statements. About two months after the date of
his opinion, Gilbert learned that an insurance company
was planning to loan Grandtime $150,000 in the form of
a first-mortgage note on the building. Realizing that the
insurance company was unaware of the existing lien on

the building, Gilbert had Bradley notify the insurance
company of the fact that Grandtime's building was
pledged as collateral for a term note.
Shortly after the events described above, Gilbert was
charged with several violations of professional ethics.
Required:
Identify and discuss at least four ethical implications of
those acts by Gilbert that were in violation of the AICPA
Code of Professional Conduct.
4-21
Jensen, Inc., filed suit against a public accounting firm,
alleging that the auditors' negligence was responsible
for failure to disclose a large defalcation that had been
in process for several years. The public accounting firm
responded that it may have been negligent, but that
Jensen, Inc., was really to blame because it had
completely ignored the public accounting firm's
repeated recommendations for improvements in
internal control.
Required:
If the public accounting firm was negligent, is it
responsible for the loss sustained by the client? Does the
failure by Jensen, Inc., to follow the auditors'
recommendation for better internal control have any
bearing on the question of liability? Explain.
4-26
The international CPA firm of Arthur Andersen faced
significant liability in conjunction with its audits of
Enron Corporation.
Required:

From a legal liability perspective, describe the unique
features of this audit case.
Describe the important implications of this audit case
for a firm of public accountants.

5–36
Comment on the reliability of each of the following
examples of audit evidence. Arrange your answer in the
form of a separate paragraph for each item. Explain fully
the reasoning employed in judging the reliability of each
item.
5-49
Audit risk should be considered when planning and
performing an audit of financial statements in
accordance with generally accepted auditing standards.
6–25

Mary Deming has been asked to accept an engagement
to audit a small financial institution. Deming has not
previously audited a financial institution.
6–26
Assume that you have been assigned to the audit of
Lockyer Manufacturing Company. You have completed
the procedures for gathering information about the
company and its environment, including internal
control.

Questions Requiring Analysis: 7-28
Problem 7-28.
Discuss the advantages to CPAs of documenting internal
control by using:
Problem 7-33.
Required:
Identify the weaknesses in Randall's system of
corporate governance and provide suggestions for
improvement in the system. Organize your answer as
follows:

Problem 9-29.
Problem 9-38.

Refer to Chapter 11 of the textbook, Objective Question
11-38.
Assume that fraud has been discovered in the “Possible
Errors and Fraud” list, shown as A through O in the
problem. Select two of the fraud items from the list and
note them here:
Following the scientific method, answer the following
questions below:
Do background research in relationship to the issue to
get a more in-depth understanding of the situation.
Construct your hypotheses concerning the issue which

we will use to test our data against.
Test your Hypotheses by doing experiments.
Analyze your data and draw a conclusion concerning the
population under study.
Communicate your results.

Questions Requiring Analysis 12-21
Nolan Manufacturing Company retains you on April 1 to
perform an audit for the fiscal year ending June 30.
During the month of May, you make extensive studies of
internal control over inventories.
All goods purchased pass through a receiving
department under the direction of the chief purchasing
agent. The duties of the receiving department are to
unpack, count, and inspect the goods. The quantity
received is compared with the quantity shown on the
receiving department’s copy of the purchase order. If

there is no discrepancy, the purchase order is stamped
“OK—Receiving Dept.” and forwarded to the accounts
payable section of the accounting department. Any
discrepancies in quantity or variations from
specifications are called to the attention of the buyer by
returning the purchase order to him with an
explanation of the circumstances. No records are
maintained in the receiving department, and no reports
originate there.
As soon as goods have been inspected and counted in
the receiving department, they are sent to the factory
production area and stored alongside the machines in
which they are to be processed. Finished goods are
moved from the assembly line to a storeroom in the
custody of a stock clerk, who maintains a perpetual
inventory record in terms of physical units, but not in
dollars.
What weaknesses, if any, do you see in the internal
control over inventories?
Problem 12-35
Described below are potential financial statement
misstatements that are encountered by auditors.
1. Inventory is understated because warehouse
personnel overlooked several racks of parts in taking
the physical inventory.
2.Inventory is overstated because warehouse personnel
included inventory items received subsequent to year-
end while recording the purchase in the subsequent
year to hide inventory shortages.

3. Inventory is overstated because management
instructed computer personnel to make changes in the
file used to price inventories.
You are part of the audit team that is auditing Happy
Chicken, Inc., a company that franchises Happy Chicken
family restaurants. During the current year,
management of Happy Chicken purchased for $2 million
one of its franchised locations, a store that was having
financial difficulties. In performing its analysis for
impairment of assets at year-end, management of Happy
Chicken determined that the carrying value of the asset
may not be recoverable. As a result, management
developed an estimate of the fair value of the location
using a discounted cash flow model. The estimated fair
value of the location was determined to be $1.5 million,
which resulted in an impairment loss of about $500,000.
The undiscounted future cash flows are equal to $1.7
million.
Problem 13-34
1.The following are typical questions that might appear
on an internal control questionnaire relating to plant
and equipment:
2.Are subsidiary ledgers for plant and equipment
regularly reconciled with general ledger controlling
accounts?
3. State the purpose of each of the above controls.
4. Describe the manner in which each of the above
procedures might be tested.

5. Assuming that the operating effectiveness of each of
the above procedures is found to be inadequate,
describe how the auditors might alter their substantive
procedures to compensate for the increased level of
risks of material misstatements.

Early in your first audit of Star Corporation, you notice
that sales and year-end inventory are almost unchanged
from the prior year. However, cost of goods sold is less
than in the preceding year, and accounts payable also
are down substantially. Gross profit has increased, but
this increase has not carried through to net income
because of increased executive salaries. Management
informs you that sales prices and purchase prices have
not changed significantly during the past year, and there
have been no changes in the product line. Star

Corporation relies on the periodic inventory system.
Your initial impression of internal control is that several
weaknesses may exist.
Suggest a possible explanation for the trends described,
especially the decrease in accounts payable while sales
and inventory were constant and gross profit increased.
Explain fully the relationships involved.
For this question, you’ll need to look at the ratios
presented and analyze the trends. What do the trends
mean?
Problem 14-38
The following are typical questions that might appear on
an internal control questionnaire for accounts payable.
1. Are monthly statements from vendors reconciled with
the accounts payable listing?
Monthly statements from vendors should be reconciled
to the payables ledger.
2. Are vendors’ invoices matched with receiving reports
before they are approved for payment?
The two procedures are test controls that provides
auditors the evidence to access control risk of financial
statements.
Required:
a. Describe the purpose of each of the above internal
control activities.
b. Describe the manner in which each of the above
procedures might be tested.
c. Assuming that the operating effectiveness of each
of the above procedures is found to be inadequate,

describe how the auditors might alter their substantive
procedures to compensate for the increased level of the
risk of material misstatement.
You are retained by Columbia Corporation to audit its
financial statements for the fiscal year ended June 30.
Your consideration of internal control indicates a fairly
satisfactory condition, although there are not enough
employees to permit an extensive separation of duties.
The company is one of the smaller units in its industry,
but it has realized net income of about $500,000 in each
of the last three years.
Near the end of your fieldwork, you overhear a
telephone call received by the president of the company
while you are discussing the audit with him. The
telephone conversation indicates that on May 15 of the
current year the Columbia Corporation made an
accommodation endorsement of a 60-day $430,000 note
issued by a major customer, Brill Corporation, to its
bank. The purpose of the telephone call from Brill was to
inform your client that the note had been paid at the
maturity date. You had not been aware of the existence
of the note before overhearing the telephone call.
Valley Corporation established a stock option plan for
its officers and key employees this year. Because the
options granted have a higher option price than the
stock’s current market price, the company has not
recognized any cost for the options in the financial
statements. However, a note to the financial statements

includes all required disclosures.
a.Do you believe that Valley’s management has
appropriately accounted for the stock option plan?
Explain your answer.
b.What responsibility do the auditors have for the
information in the notes to the financial statements?
c. List the audit procedures, if any, which you believe
should be applied to the stock option plan.

Questions Requiring Analysis: 16–31
The auditor's opinion on the fairness of financial
statements may be affected by subsequent events.
Required:
- Define what is commonly referred to in auditing as a
subsequent event, and describe the two general types of
subsequent events.
- Identify those auditing procedures that the auditor
should apply at or near the completion of fieldwork to

disclose significant subsequent events.
Required:
- Using the iron curtain approach, describe how Tanner
would consider whether an adjustment is required.
- Using the rollover approach, describe how Tanner
would consider whether an adjustment is required.
- Describe what SEC Staff Accounting Bulletin No. 108
requires in this situation.
While performing your audit of Williams Paper
Company, you discover evidence that indicates that
Williams may not have the ability to continue as a going
concern.
- Discuss types of information that may indicate
substantial doubt about a client's ability to remain a
going concern.
- Explain the auditors' obligation in such situations.
Objective Questions: 17–26

AC 410 Unit 8 Alternate Assignment NEW
university/ac-410-unit-8-alternate-assignment-new
AC 410 Unit 8 Alternate Assignment
The types of subsequent events and their importance to
the audit
The procedures auditors cannot perform before the end
of the audit
The different types of audit reports and the conditions
under which each is issued

AC 410 Unit 9 Alternate Assignment NEW
university/ac-410-unit-9-alternate-assignment-new
AC 410 Unit 9 Alternate Assignment

AC 410 Unit 9 Chapter 18 Assignment NEW
university/ac-410-unit-9-chapter-18-assignment-new
AC 410 Unit 9 Chapter 18 Assignment

18–29. The CPA firm of Carson & Boggs LLP is
performing an internal control audit in accordance with
PCAOB Standard No. 5.The partner in charge of the
engagement has asked you to explain the process of
determining which controls to test. Describe the
process, presenting each of the links in this process and
a short summary of how the auditors approach each of
them.
18–34. Simulation

Bill Jensen, a staff member of Zhan & Co., CPAs, has given
you the following list of what he refers to as “internal
control deficiencies” for the Zabling Co. audit and has
asked you to review each point and make certain that
you agree that each is an internal control deficiency. For
each of the following items, reply A (Agree) or D
(Disagree) indicating whether the item represents an
internal control deficiency.
18–35. Match the following definitions (or partial
definitions) to the appropriate term. Each term may be
used once or not at all.
18–36. Your working papers for an integrated audit
being performed under PCAOB Standard No. 5 include
the narrative description below of the cash receipts and
billing portions of internal control of Slingsdale Building
Supplies, Inc. Slingsdale is a single-store retailer that
sells a variety of tools, garden supplies, lumber, small
appliances, and electrical fixtures to the public, although
about half of Slingsdale’s sales are to construction
contractors on account. Slingsdale employs 12 salaried
sales associates, a credit manager, three full-time
clerical workers, and several part-time cash register
clerks and assistant bookkeepers. The full-time clerical
workers perform such tasks as cash receipts, billing, and
accounting and are adequately bonded. They are
referred to in the narrative as “accounts receivable
supervisor,” “cashier,” and “bookkeeper.”

AC 410 Unit 10 Assignment Course Reflections NEW
university/ac-410-unit-10-assignment-course-
reflections-new
AC 410 Unit 10 Assignment Course Reflections
Reflect and describe which key concepts and topics in
this course have made you a stronger candidate to enter
the business world.
Discuss how this course has affected you in your
professional development, as a student, and as a person,
as well as it has encouraged you on your academic path.

AC 410 Entire Course New

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