Category Archives: AC 410

AC 410 Unit 1 Homework Assignment latest

AC 410 Unit 1 Homework Assignment latest

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AC 410 Unit 1 Homework Assignment latest

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 latest 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 latest

AC 410 Unit 2 Homework Assignment latest

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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.

 

AC 410 Unit 3 Homework Assignment latest

AC 410 Unit 3 Homework Assignment latest

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AC 410 Unit 3 Homework Assignment

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.

 

AC 410 Unit 4 Homework Assignment latest

AC 410 Unit 4 Homework Assignment latest

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AC 410 Unit 4 Homework Assignment

Questions Requiring Analysis: 7-28
Problem 7-28.
Discuss the advantages to CPAs of documenting internal control by using:
Questions Requiring Analysis: 7-33
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:
Questions Requiring Analysis: 9-29
Problem 9-29.
Questions Requiring Analysis: 9-38
Problem 9-38.

AC 410 Unit 5 Homework Assignment latest

AC 410 Unit 5 Homework Assignment latest

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AC 410 Unit 5 Homework Assignment

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.

AC 410 Unit 6 Homework Assignment latest

AC 410 Unit 6 Homework Assignment latest

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AC 410 Unit 6 Homework Assignment

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.

Questions Requiring Analysis 13-31

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.

AC 410 Unit 7 Homework Assignment latest

AC 410 Unit 7 Homework Assignment latest

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AC 410 Unit 7 Homework Assignment

Questions Requiring Analysis 14-30
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.

Questions Requiring Analysis 15-30
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.
Questions Requiring Analysis 15-31
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.

AC 410 Unit 8 Alternate Assignment latest

AC 410 Unit 8 Alternate Assignment latest

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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 8 Homework Assignment latest

AC 410 Unit 8 Homework Assignment latest

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AC 410 Unit 8 Homework Assignment

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.
Questions Requiring Analysis: 16–35
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.
Questions Requiring Analysis: 17–24

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