Audit Pl Keystone Computers

Two of the three partners of the firm that performed the audit for the district had 55% ownership in the company that sold the district its financial management software “finance manager”. The partners’ role as vendors violated the general standard of independence under generally accepted government auditing standards. Also the auditors received a commission from the sale of another software called “student manager” and receiving commissions is prohibited by the AICPA. Also there were fundamental problems with their audit planning and efforts to test financial records. The CPA firm work that was so flawed and so far below professional standards that it failed to identify the millions that were stolen.

Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences

This course is the first in a two-part series that deals with auditing a company 's financial reports, internal controls, and

This paper analyzes a fictional privately held company, Smackey Dog Foods, Inc. as well as its fictional auditor, Keller CPAs. The analysis is based on a Keller Graduate School of Management scenario and a series of questions developed to address concepts learned throughout the External Auditing course. Concepts include: SEC influence, audit planning, audit stages, internal controls, confirmations, sample size, obtaining evidence, inventory, warehousing cycles, Professional Rules of Conduct, and auditor’s legal liability. Each of these auditing concepts are explained and then applied to the scenario between Smackey Dog Foods, Inc. and Keller CPAs.

Sofitec Computers (“Sofitec” or the “Company”) has engaged our firm to perform an audit of their financial statements for the year ending December 31, 2008. Our audit approach requires that we perform a risk based audit in which the amount of substantive testing (“work”) we perform is contingent on how effective the Company’s internal controls are, the risk of the environment the company is operating in, and the amount of risk the firm is willing to accept for issuing an improper audit opinion (i.e., Audit Risk Formula: Audit Risk = Control Risk x Inherent Risk x Detection Risk).

It is common industry knowledge that an audit plan provides the specific guidelines auditors must follow when conducting an external audit. External public accounting firms conduct external audits to ensure outside stakeholders that the company’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) standards.

The purpose of this paper is to discuss the SEC’s influence on auditing a private company and the essential activities involved in the initial planning of an audit. Next the discussion will delve into four stages of the audit and tasks performed by the auditors as well as internal control findings and various aspects of the audit.

1. Why would the owners of Lakeside, as well as the company’s banks, require that an annual audit may be made by an independent CPA firm?

Gauthier, S. J. (n.d.). Better Understanding of The Financial Statement Audit. Retrieved 06 26, 2011, from

“Keystone Computers & Networks, Inc. (KCN) is a company that sells and installs computer workstations and networking software to business customers. The CPA firm of Adams, Barnes & Co. has audited the financial statements of KCN for the past three years. The case illustrates selective audit planning working papers that were prepared by the staff of Adams, Barnes & Co. for this year’s audit.” I will be listing the order in which I would perform this audit and I will decide if I should select the client and focus on the key audit objectives while applying the audit risk model.

Sarah, president and general manager, would like to expand the business and wants to secure a $150,000 loan in order to achieve this goal. Before the loan can be approved, Sarah’s banker has requested that the corporate financial statements of Smackey Dog Foods, Inc. be audited. Keller CPAs has been hired to audit the corporate

The purpose and responsibility of an audit is to provide reasonable assurance that the financial statements are free from material misstatements whether due to fraud or error. The audit will follow the authoritative guidance provided by the PCAOB and AICPA auditing standards. In relation to Johnson & Johnson Company, it would be a plus if the auditor had experience with the Consumer, Pharmaceutical and Medical Devices, but not necessary since a firm would be able to hire an expert to consult on the audit. The test will cover risk assessment procedures, tests of controls and substantive procedures.

The auditor’s responsibilities are to audit annual financial statements and internal controls over financial reporting, and reports from the 10-Q quarterly reports. The auditor must also advice on new accounting pronouncements, and consolidating financial statements. (Intel Proxy Statement 2011, 48)

The lack of independence for external auditors will lead to the neglect of auditing risks (William R.K., 2003), which are the main reasons for the failure of certified accountants and professional accounting organizations. The consequence of the external auditors deprived of independence would be very serious. And there are many cases, which aroused by the failure of external auditors and most are related to the lack of independence. One famous example is the bankruptcy of Enron and the role played by its external auditor, Arthur Andersen (Todd, S., 2003). Arthur Andersen was once one of the biggest accounting companies in the world, and was canceled for the involvement in the Enron bankruptcy scandal.

This paper critically analyses the independence of the internal audit function through its relationship with management and the audit committee. Given the growing role of internal auditing in contemporary corporate governance and independence has gained renewed attention.