Keystone Computer Case

3157 Words Mar 18th, 2014 13 Pages
PART 1: AUDIT PLANNING
Appendix 6C Problems
6C/1. The audit plan for Keystone Computers & Networks, Inc. Section | Purpose | Content | Objectives of the Engagement | To describe the services that are to be rendered to the client | The objectives are (1) audit of KCN’s financial statements for the year ended 12/31/05, and (2) issuance of a letter on compliance with covenants of the client’s letter of credit agreement. | Business and Industry Conditions | To describe the nature of KCN’s business and industry. | KCN sells and services microcomputers, networking hardware and software to business customers. KCN is exposed to external shocks and competitive forces in its industry. To effectively compete and succeed, KCN must have
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Risks Identified as Significant Risk | Implications and Response | KNC’s strategy to target high risk customers to expand sales | Implication: Increased risk of misstatement of bad debt expense and allowance for bad debts. Response: Assign more experienced auditors to this area. Increase evidence. | Employees bonuses based on quarterly results | Implication: Increased risk of inflated sales linked to higher compensation. Response: Auditors should increase evidence for

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