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The Lakeside Company:
Auditing Cases

SOLUTIONS MANUAL 11e

Table of Contents

John M. Trussel and J. Douglas Frazer

A Not on Ethics, Fraud and Sox Questions 2

A Note on Research Assignments 4

Introductory Case 6

Case 1 13

Case 2 21

Case 3 29

Case 4 39

Case 5 51

Case 6 67

Case 7 74

Case 8 83

Case 9 92

Case 10 100

Case 11 105

Case 12 115

Case 13 127
A NOTE ON ETHICS, FRAUD, AND SOX QUESTIONS

The Lakeside Company: Auditing Cases, 11th edition, has been updated in light of the accounting scandals of the
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Discuss these topics and make specific recommendations to Lakeside. Objective – Corporate governance and internal control in the public reporting context.

(4-2) Discuss the assessment of control risk for audit clients that are public companies. If Lakeside were to become a public company, what impact would that have on Abernethy and Chapman 's assessment of Lakeside 's control risk and the evaluation of internal control? Objective – Internal control both in the public reporting context. Section 404 audits.

(5-1) As noted in Case 1, Lakeside in considering the issuance of stock to the public. Write a report discussing tests of controls for clients that are public companies compared with those that are not public companies. If Lakeside were to become a public company, what impact would that have on Abernethy and Chapman 's tests of controls? Objective – Comparison of internal auditing in the general case and in the public case.

(7-1) The case assumes that tests of controls have been completed and substantive testing in the payroll area has commenced. During the internal control evaluation and testing what options are available to the CPA to document problems and communicate their
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