audit is scheduled to begin in one weck. With respcct to past duc audit fccs, Alma1. Alma, CPA, had not been paid yet her prior year's audit fee. The current year',audit is scheduled to begin in one weck. With respect to past duc audit fccs, Almshoulda. Perform the scheduled audit and allow the company to pay when cash flowdifficulties are alleviated.b. Perform the scheduled audit only after arranging a definite payment scheduleand securing notes signed by the company.C. Inform management that the past due audit fees may be considered a loan onwhich interest must be computed for financial statement purposes.d. Inform management that the past-due audit fees are considered an impairmentof auditor's independence.2. Without the consent of the client. a CPA should not disclose confidentialinformation contained in working papers to aa, Court that has issued a valid subpoena.b. Disciplinary body created under state statute.c. Voluntary quality control review board.d. CPA firm that has purchased the CPA’s practice.

Answer- Option D Inform management that the past due audit fees are considered an impairment of the…

Answered: car's audit is scheduled to begin in…

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter17: Other Services Provided By Audit Firms

Section: Chapter Questions

Problem 52RSCQ

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Which of the following is correct regarding the result of a cash disbursement cut-off rendered by an auditor to gather evidence regarding the completeness assertion of a financial statements audit client's liability accounts? A. A January cash disbursement entry debiting accrued expense supported by documents dated December shall understate prior year's liability and profit. B. A January cash disbursement entry debiting accrued expense supported by documents dated January shall overstate prior year's liability and profit. C. A January cash disbursement entry debiting expense supported by documents dated January shall understate prior year's liability and overstate prior year's profit. D. A January cash disbursement entry debiting expense supported by documents dated January shall have no effect on the prior year's liability and profit.
You are the manager responsible for the audit of Bole Company, a chain of health and leisure clubs owned and managed by the Phil Addis family. The audit for the year ended 30 November 2019 is nearing completion and the draft financial statements recognize total assets of GH¢27 million and profit before tax of GH¢2.2 million. The audit senior has left the following file notes for your consideration during your review of the audit working papers.1. Cash transfers During a review of the cash book, a receipt of GH¢350,000 was identified which was accompanied by the description ‘BD’. Bank statements showed that the following day a nearly identical amount was transferred into a bank account held in a foreign country. When I asked the financial controller about this, she requested that I speak to Mr. Addis, as he has sole responsibility for cash management. According to Mr. Addis, an old friend of his, Ababa Ethiop, has loaned the money to the company to fund further expansion and the money…
SEC Independence and Nonaudit Services. Is independence impaired on these SEC filingaudits according to SEC independence rules regarding nonaudit services?a. CPA Dakota Tidrick is a staff assistant II auditor on the Section Co. audit. Upon theaudit completion date in January, Tidrick drafted the balance sheet, income statement,comprehensive income statement, statement of cash flows, and notes for review by theengagement partner before the auditors’ report was finalized.b. CPA Mel Carnes is a manager in the firm’s consulting division. He spent 100 hours withthe Section Co. audit client on an accounts payable information system study, whichinvolved selecting the preferred software and supervising Section Co.’s employees instartup operations.
The partner in charge of the Kappeler Corporation audit comes by your desk and leaves a letter he has started to the CEO and a copy of the cash flow statement for the year ended December 31, 2020. Because he must leave on an emergency, he asks you to finish the letter by explaining: (1) the disparity between net income and cash flow, (2) the importance of operating cash flow, (3) the renewable source(s) of cash flow, and (4) possible suggestions to improve the cash position. Kappeler CorporationStatement of Cash FlowsFor the Year Ended December 31, 2020 Cash flows from operating activities Net income $ 100,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $ 10,000 Amortization expense 1,000 Loss on sale of fixed assets 5,000 Increase in accounts receivable (net) (40,000) Increase in inventory (35,000) Decrease in accounts payable (41,000) (100,000) Net…
You are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: 1) Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. 2) Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…
For the following independent situations, assume that you are the audit partner on the engagement: 1. The client recorded impairment of goodwill for $40,000 last year. It recorded reversal of impairment in goodwill for $20,000 this year after considering the carrying amount and recoverable amount of the cash generating unit. Net income is $10,000 in current year. Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.
The auditor of Cubs obtained the following client-prepared bank reconciliation (See Image) The following information is available: Evan Monroe was promoted to controller on December 15, year 2; his former position was assistant controller—fixed assets. Evan Monroe has his personal bank accounts with First Bank of Munich. Joe Smith was hired on December 1, year 2, as a staff accountant. Joe Smith’s prior job was with First Bank of Munich. Cubs expects the year-end close to be complete on January 6, year 3. The adjustments on the bank reconciliation were booked on January 30, year 3. Required: In the table below, identify six potential issues that the auditor might have when examining the bank reconciliation prepared by Cubs from the list provided of potential issues. An issue may be used once or not at all. Reconciliation is not mathematically accurate. Reconciliation balance was not properly agreed to the December 31 general ledger balance.…
For each of the procedures described in the table below, identify the audit procedure performed and classification of the audit procedure using the following: Audit Procedures: (1) Analytical procedure (2) Confirmation (3) Inquiry (4) Inspection of records or documents (5) Inspection of tangible assets (6) Observation (7) Recalculation (8) Reperformance Classification of Audit Procedure: (9) Substantive procedures (10) Test of controls Procedure Audit Procedure Classification of Audit Procedure a. Requested responses directly from customers as to amounts due. b. Compared total bad debts this year with the totals for the previous two years. c. Questioned management about likely total uncollectible accounts. d. Watched the accounting clerk record the daily deposit of cash receipts. e. Examined invoice to obtain evidence in support of the ending recorded balance of a customer. f. Compared a sample…
Assume that you have audited accounts receivable as of 12/31/2020 and are confident that the ending balance should be $7,188,000. Further, you know that the audited balance as of 12/31/2019 was $8,462,000. You also verified cash deposits from customers through a review of the bank account. Based on that review you believe that cash receipts from customers ranges from an amount of $40,000,000 to $41,000,000. Which amount below would represent an overstatement of revenue for the year ending 12/31/2020, based on the facts above? 1. $38,500,000 2. $41,000,000 3. $39,762,000 4. $39,100,000
As a part of his audit of the financial statements of Marlborough Corporation for the year ended March 31, 199X, Mark Wayne, CIA is reviewing the balance sheet presentation of a $1,200,000 advance to Franklin Olds. Marlborough’s president. The advance, which represents 50 percent of current assets and 10 percent of total assets, was made during the year ended March 31, 199X. it has been described in the balance sheet as “miscellaneous accounts receivable” and classified as a current assets. Olds informs the CIA that he has used the proceeds of the advance to purchase 35,000 shares of Marlborough’s common stock, in order to forestall a takeover raid on the company. He is reluctant to have his association with the advance described in the financial statements because he does not have voting control and fears that this will “just give the raiders ammunition.” Olds offers the following four-point program as an alternative to further disclosure” (1) Have the…
You are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…
You are the audit manager of Matfine & Co and are reviewing the key issues identified in the files of two audit clients as follows: Pito Industries Co (Pito) Pito’s year-end was 31 March 2019 and the draft financial statements show revenue of $32·2 million, receivables of $6·1 million and profit before tax of $3.4 million. The fieldwork stage for this audit has been completed. A customer of Pito owed an amount of $375,000 at the year-end. Testing of receivables in April highlighted that no amounts had been paid to Pito from this customer as they were disputing the quality of certain goods received from Pito. The finance director is confident the issue will be resolved and no allowance for receivables was made with regards to this balance. Albo Trading Co (Albo) Albo is a new client of Matfine & Co, its year-end was 31 January 2019 and the firm was only appointed auditors in February 2019, as the previous auditors were suddenly unable to undertake the audit. The fieldwork…

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