Wren, Inc., a nonpublic company, retains Ying and Company CPA to audit its financial statements and internal control. Sarah Smith, the senior on the audit prepared the following first draft of an unmodified report:
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- 42-Mr. X is an auditor of XYZ Company. During the course of audit, he found that Mr. Y who was one of the executive directors of the company raised OMR 15,000 from the debenture holder which was beyond his authority. On confirming, he replied by e-mail that it was later approved by board. Can the e-mail received from executive director be considered as valid audit document? O a. Unable to decide as the information is not sufficient O b. No, it cannot be considered as valid audit document O c. Only the evidence received in hard form is valid o d. Yes, it can be considered as valid audit documentRead the facts of the case in Problem 2-26 to become familiar withthe fraud involving Koss Corporation. From the company’s October 7,2009, proxy statement (Def 14A filing with the SEC), we know the followingfacts about the company’s audit committee and its members:Thomas L. Doerr 65, has been a director of the company since 1987. In1972, Mr. Doerr co-founded Leeson Electric Corporation and served asits president and CEO until 1982. The company manufactures industrialelectric motors. In 1983, Mr. Doerr incorporated Doerr Corporation asa holding company for the purpose of acquiring established companiesinvolved in distributing products to industrial and commercial markets.Currently, Mr. Doerr serves as president of Doerr Corporation.Mr. Doerr owns no stock in Koss Corporation and received $24,000 incash compensation during 2009 to serve on the audit committee.Lawrence S. Mattson 77, has been a director of the company since 1978.Mr. Mattson is the retired president of Oster company, a…Eric Greenhills, a partner in the CPA firm of XYZ & Co., LLP, audited the financial statements of ABC Company. The audit report can be signed by a. Eric Greenhills XYZ & Co., LLP Yes Yes b. Eric Greenhills XYZ & Co., LLP No No c. Eric Greenhills XYZ & Co., LLP Yes No d. Eric Greenhills XYZ & Co., LLP No Yes
- uestion:1 A privately held company recently outsourced its information processing system to a CPA who also has been asked to conduct the year-end financial statement audit. Management accepts responsibility for the information processed by the CPA and the CPA will not assume the role of an employee in any way. The statement pertains to AICPA code of conduct rule: A. Commissions and Referral Fees C. Independence B. Confidential Client Information D. Integrity and ObjectivityStatement 1: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should take no action because the auditor has no obligation to make any further inquiries, Statement 2: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should notify the entity that the auditor's report may no longer be associated with the financial statements. Statement 3: After an audit report containing an unqualified opinion on a non-public client's financial statements was issued, the client decided to sell the shares of a subsidiary that accounts for 30% of its revenue and 25% of its net income. The auditor should describe the effect…SEC Independence Rules. Is independence impaired for the individual or the publicaccounting firm on these SEC filing audits according to SEC independence rules?a. CPA Yolanda is the Best & Co engagement partner on the Casa Construction Company (CCC)audit supervised from the Santa Fe office of the firm. Yolanda owns 100 shares of CCC.b. CPA Yolanda sold the 100 CCC shares to CPA Javier, who is another partner in the SantaFe office but who is not involved in the CCC audit.c. CPA Javier transferred ownership of the 100 CCC shares to his wife.d. CPA Javier’s wife gave the shares to their 12-year-old son.e. CPA Javier’s son sold the shares to Javier’s father.f. CPA Javier’s father was happy to combine the 100 CCC shares with shares he alreadyowned because now he owns 25 percent of CCC and can control many decisions of theboard of directors.g. CPA Javier’s father declared personal bankruptcy and sold his CCC stock. CCC thenhired him to fill the newly created position of director of…
- An auditor’s independence would not be considered impaired if she or he hada. Owned common stock of the audit client but sold it before the company became a client.b. Sold short the common stock of an audit client while working on the audit engagement.c. Served as the company’s treasurer for six months during the year covered by the audit butresigned before the company became a client.d. Performed the bookkeeping and financial statement preparation for the company, whichhad no accounting personnel and for which the president had no understanding ofaccounting principles.Written Representations Omissions. During the audit of the annual financial statements of Amis Manufacturing Inc., the company’s president, Vance Molar, and WandaDweebins, the engagement partner, reviewed matters that were supposed to be includedin written representations. Amis Manufacturing is a private company. Upon receiptof the following representations, Dweebins contacted Molar to state that they wereincomplete.To John & Wayne, CPAs:In connection with your examination of the balance sheet of Amis Manufacturing Inc., asof December 31, 2017, and the related statements of income, retained earnings, and cashflows for the year then ended, for the purpose of expressing an opinion on whether thefinancial statements present fairly the financial position, results of operations, and cashflows of Amis Manufacturing Inc., in conformity with generally accepted accounting principles, we confirm, to the best of our knowledge and belief, the following representationsmade to you during your…Discuss the following situations in the context of the independence of the auditor, showing clearly the principles involved: i.The audit manager in charge of the audit assignment of GEDA Ltd holds 5,000 ordinary shares (@ GH¢1 each) in the company (total shares in issue – 500,000). The audit partner holds no shares. ii.The total fee income of SAGE & Associates, a local audit firm, is GH¢700,000. The recurring audit fee receivable from Celestial Ltd, a private company is GH¢100,000. iii.The audit partner of an auditing firm is responsible for two audit assignments, Aman Ltd and Silta Ltd. Aman Ltd has recently tendered for a contract with Silta Ltd for the supply of material quantities of goods over a number of years. Silta Ltd has asked the audit partner to advice on the matter.
- J, B & J, Certified Public Accountants, has audited the Highcredit Corporation for the past five years. Recently, the Securities and Exchange Commission (SEC) has commenced an investigation of Highcredit for possible violations of Federal securities law. The SEC has subpoenaed all of J, B & J’s working papers pertinent to the audit of Highcredit. Highcredit insists that J, B & J not turn over the documents to the SEC. What action should J, B & J take? Why?While auditing the financial statements of Petty Corporation, the certified public accounting firm of Trueblue and Smith discovered that its client’s legal expense account was abnormally high. Further investigation of the records indicated the following: a. Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.b. Swindle, Fox, and Kreip were not Petty Corpora- tion’s attorneys.c. A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk.d. Boghas’s other duties included performing the endof-month bank reconciliation.e. Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.1. What control procedures could Petty Corporation have employed to prevent this unauthorized use of cash?…3. Mini Case 3 XYZ Restaurants Corp. has recently completed its annual external audit of financial records. The outside auditing firm employed to conduct this audit has presented the results to the company president and asked for her approval and signature on the document. However, the president is unsure of the results and is unwilling to attest to the results of the audit. In last month’s corporate board meeting, members openly demanded the resignation of the president on the grounds that she is holding up company progress through her actions. The board has also determined that, in its opinion, her signature is not needed on these documents Question How should the president respond?