External Auditing: Assignment

“.06 An auditor ordinarily does not possess legal skills and, therefore, cannot make legal judgments concerning information coming to his attention. Accordingly, the auditor should request the client 's management to send a letter of inquiry to those lawyers with whom management consulted concerning litigation, claims, and assessments.

Analytical procedures should be applied to the determination of commission that is being paid to Smackey salespeople. The commissions on the average are off by 11 percent showing that they may not be reasonable. The auditors also need to perform the analytical procedures for inventory to determine if the inventory is being misstated. This would be a concern due to the amount of waste and returns. The test of details of balances will need to be done on the accounts receivables to determine if they are properly stated.

| (TCO A) Listed below are several information, characteristics, and accounting principles and assumptions. Match the letter of each with the appropriate phrase that states its application.

The payroll register is used by employers in preparing Form W-2, the wage and tax statement sent to

5. The payroll application will be written and then tested for both accuracy and performance.

| Paragraph No. 1 tells the reader that the topic is casual employee status in the context of workers' compensation law. It also tells the reader that Maryland case law will be the authority used as the basis for the memo. Sentence 1 ends with the term casual employee and sentence 2 repeats this term. This is a transition device to establish coherence between the sentences.

Accounting for the lawsuit is complicated at this stage because the company and/or the lawyer would be unwilling to admit in print (i.e., in the financial statements) that they would settle the lawsuit, and at what amount. This might provide too much information to the plaintiff that hurt company interests. Note disclosure of the lawsuit, in general terms, is the likely outcome, although an accrual for $150,000 would be made if the company were to share this information with its accountants. This is the ethically appropriate outcome. When the accrual is made, separate disclosure would be minimal so its treatment would not be obvious to the plaintiff.

Our team is given the task to account for a pending litigation. We are to determine how pending litigation should be reported on the current and future financial statements. M Corporation was sued for patent infringement and we will present whether M Corporation should accrue a liability, disclose a liability, do both, or do nothing. The case accounting for the litigation and the subsequent overturned verdict was ongoing for four years between M Corporation and W Corporation and, as litigation is unpredictable, changes will have to be made accordingly. We will present how M Corporation should a) account for the pending litigation in 2007 - the year the claim was

To provide information on how employee fulfill the obligations of their positions when work arrangements wherein employees are given greater scheduling freedom.

2. There’s a considerable risk that an employee will not turn-in the timesheet in a timely manner, and so will not be paid.

d. Trace the date, check number, and amount of outstanding item – Occurrence & Completeness. (AU-C 315.A114 a.i-ii)

| * David should keep a straightforward and honest relationship with MAL. * David integrity will be compromised if these errors are discovered.

To determine if a company has future uncertainties such as a lawsuit, there should be a review of notes to the financial statements. According to Schroeder, Clark, and Cathey (2009), “review the notes to financial statements to determine if loss contingencies exist that may reduce future earnings and cash flows” (p. 158).

2001. It was the year that every individual; man, woman and children on Earth would remember. There was the September 11 event which was considered the worst terrorist attack that has happened in U.S. history, killing a total of 2, 977 people. And not long after that, in the business world, on December 2, the greatest corporate failure was exposed. The crash of Enron in US, followed by the worldwide collapse of its auditor, Arthur Andersen became one the most popular accounting scandal where it is still being talked about even after a decade has passed. Following this scandal, other massive organizations like WorldCom (2002), AIG (2004), and Satyam Computer Services (2009) shared the same fate. Since then, there have been questions being

with a new partner, Harry Fowl. Harry has had some existing business and you are