Smackey Questions

2254 Words Dec 5th, 2012 10 Pages
Worksheet for You Decide

Name Cathie Reid Course Code ACC555 Grade ___/ Date_12_/12_/12_

Questions:

Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.

Solution:

The SEC does not have direct influence over the audit of Smackey Company because, Smackey is not a public held organization, they do not have assets in excess of $10 million, and they do not have over 500 stockholders; which are the requirements for public and privately held companies. The SEC does have indirect influence over the audit because all companies, whether public or private are required to comply with General Accepted Accounting Principles (GAAP) and the SEC plays a significant role in influencing these
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Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

Solution:

The 4 stages of the audit are 1) Planning and risk assessment, 2) Test of internal controls, 3) Substantive tests procedures, and 4) Finalization.
1. Planning and risk assessment: In order to access the risk of Smackey’s, the auditors would have to make sure they understand what type of business and the business industry of Smackey; a good review of Smackey’s internal controls would need to be addressed; and an assessment of transaction related audit object which consists of occurrence, completeness, accuracy, classification, timing, posting, and summarization.
2. Test of internal controls: In order to test internal controls the audit team should review Smackey’s documents, records,and reports on file. The audit team should also speak with the staff at Smackey’s to determine if they are following policies and procedures as outlined in company policies.
3. Substantive tests procedures: The audit team should perform substantive tests on Smackey’s accounting transactions and

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