Dawson Co’s computerised wages program is backed up daily, however for a period of 3 months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these 3 months are $32m. Profit before tax is $200m. Reproduce a standard audit report(Disclaimer of opinion) to give your views on this situation. *Only mention appropriate extracts which are relevant.
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Dawson Co’s computerised wages program is backed up daily, however for a period of 3 months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these 3 months are $32m. Profit before tax is $200m.
Reproduce a standard audit report(Disclaimer of opinion) to give your views on this situation.
*Only mention appropriate extracts which are relevant.
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- Dawson Co’s computerised wages program is backed up daily, however for a period of 3 months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these 3 months are $32m. Profit before tax is $200m. (i)Briefly give your views on this situations as an auditot (ii)state what type of auditor’s report should be issued and explain your choice.(Error Analysis and Correcting Entry) You have been engaged to review the financial statements of Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows.1. Year-end wages payable of $3,400 were not recorded because the bookkeeper thought that “they were immaterial.”2. Accrued vacation pay for the year of $31,100 was not recorded because the bookkeeper “never heard that you had to do it.”3. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $2,640 because “the amount of the check is about the same every year.”4. Reported sales revenue for the year is $2,120,000. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state’s Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that…You have been engaged to review the financial statements of Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows. 1. Year-end wages payable of $3,400 were not recorded because the bookkeeper thought that “they were immaterial.” 2. Accrued vacation pay for the year of $31,100 was not recorded because the bookkeeper “never heard that you had to do it.” 3. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $2,640 because “the amount of the check is about the same every year.” 4. Reported sales revenue for the year is $2,120,000. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state's Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that “the sales tax is a selling…
- You have been engaged to review the financial statements of Crane Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows. 1. Year-end wages payable of $3,100 were not recorded because the bookkeeper thought that “they were immaterial.” 2. Accrued vacation pay for the year of $30,300 was not recorded because the bookkeeper “never heard that you had to do it.” 3. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $2,424 because “the amount of the check is about the same every year.” 4. Reported sales revenue for the year is $2,301,260. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state’s Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that “the sales tax is a…You have been engaged to review the financial statements of Flint Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follows. 1. Year-end wages payable of $3,520 were not recorded because the bookkeeper thought that “they were immaterial.” 2. Accrued vacation pay for the year of $34,000 was not recorded because the bookkeeper “never heard that you had to do it.” 3. Insurance for a 12-month period purchased on November 1 of this year was charged to insurance expense in the amount of $2,568 because “the amount of the check is about the same every year.” 4. Reported sales revenue for the year is $2,213,280. This includes all sales taxes collected for the year. The sales tax rate is 6%. Because the sales tax is forwarded to the state’s Department of Revenue, the Sales Tax Expense account is debited. The bookkeeper thought that “the sales tax is a…You are an audit manager at Hall & Partners and the audit of Abby Co is nearly complete. The draft financial statements currently show revenue of £70m and a profit before tax of £8.2 million for the financial year ended 30 June 20X0. You have been informed that the marketing director left Abby Co on 31 May 20X0 and discovered that a legal case for unfair dismissal has been brought against Abby Co by the marketing director. During a discussion with the Human Resources (HR) director of Abby Co, you established that the company received notice of the proposed legal claim on 2 July 20X6. The HR director told you that Abby Co's lawyers believe the maximum payout would be £200,000. However, the directors do not intend to make any adjustments or disclosures in the financial statements. Which TWO of the following factors may indicate overvaluation of inventory at Abby Co? A) A decrease in demand for Abby Co's goods, requiring a price reduction B) Increased inventory levels C) Increased…
- You were engaged by Lanao Company to audit its financial statements for the first time. In examining the books, you found out that certain adjustments had been overlooked at the end of 2014 and 2015. You also discovered that other items had been improperly recorded. These omissions and other failures for each year are summarized below: 12/31/15 12/31/14 P780,000 P873,600 213,000 307,800 Salaries payable Interest receivable 259,200 384,000 Prepaid insurance Advances from customers (Collections from customers had been recorded as sales but should have been recognized as advances from customers because goods were not shipped until the following year) Machinery (Capital expenditures had been recorded as repairs but should have been charged to Machinery; the depreciation rate is 10% per year, but depreciation in the year of expenditure is to be recognized at 5%) 561,000 470,400 522,000 564,000 Based on the above and the result of your audit, answer the following: 1. What is the total effect…You are auditing the accounts receivable for Conor Company as of December 31, 2021. One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. Two of the responses had the following comments: a. “We never received these goods.” b. “The balance of $1,000 was paid on December 15, 2021.” For each of these comments, identify the steps that you would take to clear (resolve) them.You are currently planning the audit of your client, DEF plc. Its year end is 31 December 2019 and the forecast profit before tax is £15.5 million. DEF has a small internal audit (IA) department. During the year, IA started a programme of physically verifying the company's assets and comparing the results to the non-current assets register, as this type of reconciliation had not occurred for some time. To date only 15% of assets have had their existence confirmed as IA has experienced significant staff shortages and several members of the current IA team are new to DEF plc. Inventory is held in six locations and on 25 and 26 December a full inventory count will be held with adjustments for movements to the year end. This is due to a lack of available staff on 31 December. The number of audit team members are not enough to attend the counts in all the locations. In November, there was a fire in one of the inventory warchouses; inventory of £5 million was damaged and this has been…
- You are the manager responsible for the audit of Lamia Ltd, a manufacturing company with a year ended 30 September 2011. The audit work has been completed and reviewed and you are due to issue the audit report in three days. The draft audit opinion is unmodified. The financial statements show turnover for the year ended 30 September 2011 of Tk.15 million, net profit of Tk.3 million, and total assets at the yearend are Tk.80 million. The finance director of Lamia Ltd telephoned you this morning to tell you about the announcement yesterday, of a significant restructuring of Lamia Ltd, which will take place over the next six months. The restructuring will involve the closure of a factory, and its relocation to another part of the country. There will be some redundancies and the estimated cost of closure is Tk.250,000. The financial statements have not been amended in respect of this matter. Required: In respect of the announcement of the restructuring: (hint: Audit Report) (i) Comment on…You are currently planning the audit of your client, DEF plc. Its year end is 31 December 2019 and the forecast profit before tax is £15.5 million.DEF has a small internal audit (IA) department. During the year, IA started a programme of physically verifying the company’s assets and comparing the results to the non-current assets register, as this type of reconciliation had not occurred for some time. To date only 15% of assets have had their existence confirmed as IA has experienced significant staff shortages and several members of the current IA team are new to DEF plc.Inventory is held in six locations and on 25 and 26 December a full inventory count will be held with adjustments for movements to the year end. This is due to a lack of available staff on 31 December. The number of audit team members are not enough to attend the counts in all the locations. In November, there was a fire in one of the inventory warehouses; inventory of £5 million was damaged and this has been written…Anton Blair is the manager of a medium-size company. A few years ago, Blair persuaded the owner to base a part of his compensation on the net income the company earns each year. Each December he estimates year-end financial figures in anticipation of the bonus he will receive. If the bonus is not as high as he would like, he offers several recommendations to the accountant for year-end adjustments. One of his favorite recommendations is for the controller to reduce the estimate of doubtful accounts. Required 1. What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet? 2. Do you believe Blair’s recommendation to adjust the allowance for doubtful accounts is within his rights as manager, or do you believe this action is an ethics violation? Justify your response. 3. What type of internal control(s) might be useful for this company in overseeing the manager’s recommendations for accounting changes?