ACCT 555 Full Class

 ACCT 555 Full Class

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ACCT 555 Week 1 Homework

Chapter 2, pages 41–44: Problems 2-16, 2-17, 2-19, and 2-20

Chapter 3, pages 67–69: Problems 3-23, 3-25, and 3-26

ACCT 555 Week 2 Homework

4-18, 4-21, 4-22, 5-17, 5-19, 5-21, 5-26, 11-19, 11-20

ACCT 555 Week 3 Homework Assignment

Week 3 Homework

6-19 (Objective 6-1) The following questions concern the reasons auditors do audits. Choose the best response.

a. Which of the following best describes the reason why an independent auditor reports on financial statements?

b. Because of the risk of material misstatement, an audit should be planned and performed with an attitude of

c. The major reason an independent auditor gathers audit evidence is to

6-20 (Objective 6-3) The following questions deal with errors and fraud. Choose the best response.

a. An independent auditor has the responsibility to design the audit to provide reasonable assurance of detecting errors and fraud that might have a material effect on the financial statements. Which of the following, if material, is a fraud as defined in auditing standards?

b. What assurance does the auditor provide that errors, fraud, and direct-effect illegal acts that are material to the financial statements will be detected?

6-27 (Objectives 6-6, 6-7) The following are specific transaction-related audit objectives applied to the audit of cash disbursement transactions (a through f), management assertions about classes of transactions (1 through 5), and general transaction-related audit objectives (6 through 11).

Specific Transaction-Related Audit Objective

a. Recorded cash disbursement transactions are for the amount of goods or services received and are correctly recorded.

7-25 (Objectives 7-3, 7-4) The following questions concern persuasiveness of evidence. Choose the best response.

a. Which of the following types of documentary evidence should the auditor consider to be the most reliable?

b. Which of the following statements concerning audit evidence is true?

c. Audit evidence can come in different forms with different degrees of persuasiveness. Which of the following is the least persuasive type of evidence?

d. Which of the following presumptions is correct about the reliability of audit evidence?

7-26 (Objectives 7-5, 7-6) The following questions concern audit documentation. Choose the best response.

a. Which of the following is not a primary purpose of audit documentation?

b. During an audit engagement, pertinent data are compiled and included in the audit files. The audit files primarily are considered to be

c. Although the quantity, type, and content of audit documentation will vary with the circumstances, audit documentation generally will include the

d. The permanent file of an auditor’s working papers most likely would include copies of the

7-27 (Objective 7-4) The following are examples of documentation typically obtained by auditors:

7-28 (Objective 7-4) The following are examples of audit procedures:

8-25 (Objectives 8-1, 8-3) The following questions concern the planning of the engagement. Select the best response.

a. Which of the following is an effective audit planning procedure that helps prevent misunderstandings and inefficient use of audit personnel?

8-28 (Objectives 8-2, 8-3, 8-4, 8-5) The following are various activities an auditor does during audit planning.

ACCT 555 Week 4 Homework Assignment

9-22 (Objectives 9-1, 9-2) The following questions deal with materiality. Choose the best response.

9-23 (Objectives 9-6, 9-8) The following questions concern audit risk. Choose the best response.

·         a. Some account balances, such as those for pensions and leases, are the result of complex calculations. The susceptibility to material misstatements in these types of accounts is defined as

9-24 (Objective 9-9) The following questions deal with audit risk and evidence. Choose the best response.

10-30 (Objectives 10-1, 10-2, 10-7) The following are general questions about internal control. Choose the best response.

·         a. When considering internal control, an auditor must be aware of the concept of reasonable assurance, which recognizes that the

ACCT 555 Week 5 Homework Assignment

Chapter 12, pages 390–397: Problems 12-17, 12-18, and 12-27

Chapter 13, pages 429–430: Problems 13-22, 13-23, and 13-24

ACCT 555 Week 6 Homework

Chapter 14  . Problems 14-21, 14-22, 14-23 14-24,

Chapter 15 Problems  15-22, 15-24, 15-25,

Chapter 16- Problem 220,21,22,24,28

Chapter  17 Problem 28

ACCT 555 Week 7 Homework Assignment

20-17

a.A factory foreman at Steblecki Corporation discharged an hourly worker but did not notify the human resources department. The foreman then forged the worker’s signature on time cards and work tickets and, when giving out the checks, diverted the payroll checks drawn from the discharged worker to his own use. The most effective procedure for preventing this activity is to

b. An auditor found that employee time records in one department are not properly approved by the supervisor. Which of the following could result?

c. The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the

20-20

·         a. Identify whether each of the procedures is primarily a test of control or a substantive test of transactions.

·         b. Identify the transaction-related audit objective(s) of each of the procedures.

21-17

Which of the following controls will most likely justify a reduced assessed level of control risk for the occurrence assertion for purchases of inventory?

21-18

When an auditor tests a client’s cost accounting records, the auditor’s tests are primarily designed to determine that

21-19

Which of the following procedures is the auditor least likely to perform on the actual date the physical inventory count is observed?

21-20

·         a. For each of the preceding questions, state the purpose of the internal control.

·         b. For each internal control, list a test of control to test its effectiveness.

·         c. For each of the preceding questions, identify the nature of the potential financial misstatement(s) if the control is not in effect.

d. For each of the potential misstatements in part c, list a substantive audit procedure to determine whether a material misstatement exists

 ACCT 555  Course Project

  ACCT 555 Week 7 Course Project Smackey Dog Foods Inc

ACCT 555 Midterm 

1. (TCO F) Which of the following procedures should an auditor generally perform regarding subsequent events?

2. (TCO A) An auditor reads the letter of transmittal accompanying a county's comprehensive annual financial report and identifies a material inconsistency with the financial statements. The auditor determines that the financial statements do not require revision. Which of the following actions should the auditor take?

3. (TCO F) An auditor's independence is considered impaired if the auditor has

4. (TCO B) When an independent CPA is associated with the financial statements of a publicly held entity but has not audited or reviewed such statements, the appropriate form of report to be issued must include a(an):

5. (TCO F) Which is not a characteristic of the reliability of evidence?

6. (TCO C) According to PCAOB standards, the nature and extent of required planning activities for an issuer audit are influenced by all of the following factors, except for:

7. (TCO F) Analytical procedures must be used during which phase(s) of the audit?

Test of controls OR planning OR completion

8. (TCO F) In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?

9. (TCO F) The primary purpose of performing analytical procedures in the planning phase of an audit is to

10. (TCO G) The most widely used profitability ratio is

11. (TCO G) Which ratio is best used to assess a company's ability to meet its long-term debt obligations?

1. (TCO A) Match the following definitions to the appropriate terms.

2. (TCO B) The following is a portion of a qualified audit report issued for a private company.

To the shareholders of Tamarak Corporation,

We have audited the accompanying balance sheet of Tamarak Corporation as of October 31, 2009, and the related statements of income, retained earnings, and cash flows for the past year. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

The company has included in property and debt in the accompanying balance sheet certain lease obligations that, in our opinion, should be expensed in order to conform with generally accepted accounting principles. If these lease obligations were capitalized, property would be decreased by $4,000,000, long-term debt by $2,000,000, and retained earnings by $180,000 as of October 31, 2009, and net income and earnings per share would be decreased by $180,000 and $0.62, respectively, for the past year.

3. (TCO C) The following situation involves a possible violation of the AICPA's code of professional conduct. For this situation, (1) determine the applicable rule number from the code, (2) decide whether or not the code has been violated, and (3) briefly explain how the situation violates (or does not violate) the code. Your answer should be set up something like this:

Rule # _____ Violation? Yes or No.

Provide a one- or two-line explanation.

Auditor Tex Gato of the CPA firm Smackey and Smackey, CPAs, enjoyed auditing his favorite client, Super Pup Dog Food, because the client would allow him to take home to his dog a variety of dog food samples that amounted to a year's worth of dog food.

4. (TCO C) The following situation involves a possible violation of the AICPA's code of professional conduct. For this situation, (1) determine the applicable rule number from the code, (2) decide whether or not the code has been violated, and (3) briefly explain how the situation violates (or does not violate) the code. Your answer should be set up something like this:

Rule # _____ Violation? Yes or No.

Provide a one- or two-line explanation.

Howard Cunningham & Co., CPAs, designates its firm as Members of the American Institute of Certified Public Accountants. All of the partners of the firm are CPAs. However, one of the partners has recently chosen to allow her membership to lapse because of personal reasons.

5. (TCO C) Under the provisions of the Sarbanes-Oxley Act of 2002 (SOX), the audit committee of a public company has specific guidelines to which employees must adhere. Discuss some of the mandated features of the audit committee of a public company under SOX.

6. (TCO D) Discuss some of the steps the AICPA and the accounting profession as a whole can and are taking to reduce practitioners' exposure to lawsuits. You answer should provide at least five steps.

7. (TCO F) Match nine of the terms (A–K) with the definitions provided below (1–9).

A - Foot
B - Compute
C - Scan
D - Inquire
E - Count
F - Trace
G - Recompute
H - Read
I - Examine
J - Observe
K - Compare

_____ 1: A calculation done by the auditor independent of the client
_____ 2: Addition of a column of numbers to determine if the total is the same as the client's
_____ 3: A comparison of information in two different locations
_____ 4: A use of the senses to assess certain activities
_____ 5: Following details of transactions from original documents to journals
_____ 6: A less detailed examination of a document or record to determine if there is something unusual warranting further investigation
_____ 7: Obtaining information from the client in response to specific questions
_____ 8: A determination of assets on hand at a given time
_____ 9: An examination of written information to determine facts pertinent to the audit

8. (TCO G) Discuss the essential activities involved in the initial planning of an audit.

ACCT 555 Final Exam 

1. (TCO B) An auditor was unable to obtain sufficient appropriate audit evidence concerning certain transactions due to an inadequacy in the entity's accounting records. The auditor would choose between issuing a(an): (Points : 5)

2. (TCO K) An auditor should consider which of the following when evaluating the ability of a company to continue as a going concern? (Points : 5)

3. (TCO A) An auditor's independence is considered impaired if the auditor has: (Points : 5)

4. (TCO H) Which of the following should be included as a written representation from management? (Points : 5)

5. (TCO E) An auditor would most likely be concerned with internal controls that provide reasonable assurance about the: (Points : 5)

Page 2

1.(TCO A) In performing an ATTEST Engagement A CPA would be required to do what as part of the engagement? (Points : 19)

2.(TCO B) When a CPA performs an Audit the Client is always looking to receive a “CLEAN OPINION” or an Unqualified Opinion. Explain what your client must do for a CPA to justify that Unqualified Opinion? (Points : 19)

3.(TCO C) – Based upon the below 4 situations – explain your position of “why” or “why not” the following circumstances would have violated the professions ethical standards when you are a practicing CPA?

4.(TCO D) Discuss five steps individual practicing auditors can take to minimize their legal liability.(Points : 19)

5.(TCO F) Sarbanes Oxley requires that per Section 404 that Internal Controls within a publicly held company are to be reviewed, evaluated and tested at year end to insure that adequate controls are in place. In addition to understanding the Internal Controls present within your client’s company, the auditor must also evaluate whether these controls are in place, and implemented. How does an auditor evaluate these controls to see that they are working and in place?(Points : 19)

Page 3

1. (TCO E) What is COSO? Describe the 5 elements of COSO’s Internal Control-Integrated Framework. Provide an example of each of those components and explain why they are important in providing “Reliable Financial Reporting” for a company. Please provide a complete answer for full points. (Points : 30)

2.(TCO G) Business risk must be assessed in performing an audit.

(a) Define business risk in association with an audit and describe several sources of such risk.
(b) How does business risk relate to the performance of preliminary analytical procedures in an audit?
(c) There are four major areas in planning an audit engagement and there are subparts to each of the four major areas. Please identify the four major areas and the subparts that are associated with the major areas.(Points : 30)

3.(TCO H) Audit Risk consists of inherent risk, control risk, and detection risk. 
(a) Please completely define each of the above.
(b) Indicate whether each of the statements below is true or false and explain your position:
(1) The risk that material misstatement will not be prevented or detected on a timely basis by internal controls can be reduced to zero by having effective controls in place.
(2) Detection Risk is a function of the efficiency of an auditing procedure.
(3) Cash is more susceptible to theft than an inventory of coal because it has greater inherent risk?
(4) The Inherent risk of the theft of an inventory of cellphones at a mall store is greater than the misappropriation of cash at a COSTCO Store?(Points : 30)

4.(TCO I) Accounts Receivable - For each of the following, please explain if an auditor’s review of the client’s sales cutoff would detect these problems:
(a) Would excessive goods returned for credit be detected by a sales cut-off test – why or why not?
(b) Would unrecorded sales discounts be detected by a sales cut-off test – why or why not?
(c) Lapping of year-end accounts receivable be detected by a sales cut-off test – why or why not?
(d) Inflated sales for the year – could it be detected by a sales-cut-off test – why or why not?(Points : 30)

5.(TCO J) One of the major problems in a computer system is that incompatible functions may be performed by the same individual. Identify from the below choices the control compensating for inadequate segregation of duties in a computer system. Explain why you have selected your response.
(a) Echo Checks
(b) A check digit system
(c) Computer-Generated hash totals
(d) A computer access log (Points : 30)

6.(TCO K) You are the Senior Auditor for WWZ Co. and you have completed the testing of all the accounts. However, prior to issuing your report, what are at least five other procedures or reviews that must be performed prior to issuing your report? Explain your responses(Points : 30)

ACCT 555 Week 8 Final Exam

1. (TCO A) There are ten generally accepted auditing standards, divided into three categories. What are the standards of reporting?

2. (TCO A) Distinguish between generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP). What professional organization establishes GAAS? What professional organization establishes GAAP?

3. Assume you are the partner in charge of the audit of Franklin Corporation's 2002 financial statements. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate opinion you should issue and why you would issue that opinion

4. State whether there is any violation of the AICPA Code of Professional Conduct, and the nature of the violation. Where there is a violation, evaluate the potential legal liability the accountant may face. Justify your position

5. Discuss at least five of the actions that can be taken by individual CPAs, to protect themselves from legal liability

6. (TCO E) Bobby Thigpen, waiter at Relief Stop, has been taking cash from the restaurant. Thigpen prepares a customer's check from which the customer pays. Thigpen then destroys the check, and prepares a new one with different items of lower cost. He presents the new check and indicated amount on the check to the cashier, and saves the excess cash for himself. Question: Formulate three internal control features that the restaurant could implement, to eliminate this defalcation

7. Three types of legal documents and records that auditors examine in the planning phase of an audit are the corporate charter and bylaws, corporate minutes of meetings of the board of directors and stockholders, and contracts. Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

1. (TCO F) What are specific audit objectives? Explain their relationship to the general audit objectives. (Points: 25)

2.(TCO H) Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts (segments) in the financial statements. Also explain why allocating to balance sheet accounts is more common than allocating to income statement accounts. (Points: 25)

Allocating the preliminary judgment about materiality to individual segments is necessary because evidence is accumulated for segments rather than for the financial statements as a whole. Allocating to segments establishes a tolerable misstatement amount for each segment, which helps the auditor decide the appropriate audit evidence to accumulate for each segment. Most practitioners allocate materiality to balance sheet accounts rather than income statement accounts because there are fewer balance sheet than income statement accounts

3. (TCO I) For each of the following potential misstatements, provide one potential audit test that could be used to detect the misstatement

4. (TCO I) Describe how the auditor tests the classification objective for accounts receivable. (Points: 25)

The classification objective is tested by reviewing the aged trial balance for material receivables from affiliates, officers, directors, or other related parties. If notes receivable or accounts that should not be classified as a current asset are included with the regular accounts, these should also be segregated. Finally, if credit balances in accounts receivable are significant, it is appropriate to reclassify them as accounts payable

5. The design of tests of details of balances for inventory is affected by audit results from multiple cycles. Identify the cycles, other than the inventory and warehousing cycle, that affect the audit of inventory

6. Describe three computer auditing techniques available to the auditor

7. (TCO K) Match seven of the terms (a-p) with the description/definitions provided below (1-7):