You are the auditor of the Oman Construction Company and have started planning for the 2020 audit engagement. As part of your planning activities, you have asked the CEO about important events during the year that might have an impact on the audit. In response, he asked you to be relaxed on auditing especially with the Chief Finance Officer because his son is seriously ill. Apparently, the child must travel regularly to the United States for expensive medical treatments. What fraud conditions are deemed present in this situation? a. None of the choices are correct b. pressure to commit fraud c. incentive to commit fraud d. rationalization to commit fraud Clear my choice

You are the auditor of the Oman Construction Company and have started planning for the 2020 audit engagement. As part of your planning activities, you have asked the CEO about important events during the year that might have an impact on the audit. In response, he asked you to be relaxed on auditing especially with the Chief Finance Officer because his son is seriously ill. Apparently, the child must travel regularly to the United States for expensive medical treatments. What fraud conditions are deemed present in this situation? a. None of the choices are correct b. pressure to commit fraud c. incentive to commit fraud d. rationalization to commit fraud Clear my choice

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 22E: Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different...

See similar textbooks

Similar questions

Ms. Fatema started his auditing service for various types of companies in the year 2020. Can you explain her about acceptable audit risk, client business risk, and risk of material misstatements? When she what to consider these types of risks?
Dave Czarnecki is the managing partner of Czarnecki andHogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he issurprised when his friend James Foley asks him, “Doesn’t it bother you that your clientsdon’t look forward to seeing their auditors each year?” Dave responded, “Well, auditingis only one of several services we provide. Most of our work for clients does not involvefinancial statement audits, and our audit clients seem to like interacting with us.”a. Identify ways in which a financial statement audit adds value for clients.b. List other services other than audits that Czarnecki and Hogan likely provides.c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways inwhich they can expand their practice. Identify at least one additional service that youbelieve the firm should provide and explain why you believe this represents a growthopportunity for CPA firms.
The auditor worked for this client for years. But before accepting or continuing with the client, What are the reasons the auditor or audit firm should or should not retain this existing client this time around using the information below about the client? What risks could the client, its business, and its environment pose to the auditor or audit firm? The client: Although client cash flows have been stable, the disruption caused by the 2020 global pandemic made it difficult for retail lessors to pay their rent on time. Due to the company's tenant-friendly approach, retail clients were allowed to renegotiate their lease and temporarily pause rent payments between June 2020 and July 2021, shifting those payments to the last 12 months. Most of these leases will expire in the next two years, including all retail companies unable to pay their rent. However, they estimate that they will receive all the lost cash flow from these tenants within a couple of years. Currently, the company is a…
Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend Juarez Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.” Identify ways in which a financial statement audit adds value for clients. List services other than audits that Czarnecki and Hogan likely provides. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.
You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 2019. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company, he has realized a small profit for the company through foreign-exchange transactions in dollars. explain how the components of audit risk (inherent, control or detection risk) are affected.
Your neighbor, Loot Starkin, invited you to lunch yesterday. Sure enough, it was no “free lunch” because Loot wanted to discuss the annual report of Dodge Corporation. He owns Dodge stock and just received the annual report. Loot says, “Our auditors prepared the audited financial statements and gave an unqualified opinion, so my investment must be safe.”Required:What misconceptions does Loot Starkin seem to have about the auditor’s role with respect to Dodge Corporation?
The audit of KBC Solutions by Carlson and Smith, CPAs, was scheduled to end on February 28, 2019. However, Rick Carlson was uncertain whether it could happen. As the review partner, he had just completed going over the work paper files of the senior auditor in charge of the engagement, Grace Sloan, and had way too many questions to wrap things up by the end of the week. Rick called Grace into his office and asked her about some questionable judgments she had made. He hoped her explanations would be satisfactory and he could move on with completing the audit. Why did you approve the accounting for new acquisitions of plant and equipment that were not supported by adequate underlying documentation? Why did you accept the client’s determinations of accrued expenses rather than make your own independent judgments? How can you justify relying on last year’s work papers to determine the proper allowance for uncollectibles one year later? To say Grace was stressed out would be an…
The audit of KBC Solutions by Carlson and Smith, CPAs, was scheduled to end on February 28, 2019. However, Rick Carlson was uncertain whether it could happen. As the review partner, he had just completed going over the work paper files of the senior auditor in charge of the engagement, Grace Sloan, and had way too many questions to wrap things up by the end of the week. Rick called Grace into his office and asked her about some questionable judgments she had made. He hoped her explanations would be satisfactory and he could move on with completing the audit. Why did you approve the accounting for new acquisitions of plant and equipment that were not supported by adequate underlying documentation? Why did you accept the client’s determinations of accrued expenses rather than make your own independent judgments? How can you justify relying on last year’s work papers to determine the proper allowance for uncollectibles one year later? To say Grace was stressed out would be an…
The audit of KBC Solutions by Carlson and Smith, CPAs, was scheduled to end on February 28, 2019. However, Rick Carlson was uncertain whether it could happen. As the review partner, he had just completed going over the work paper files of the senior auditor in charge of the engagement, Grace Sloan, and had way too many questions to wrap things up by the end of the week. Rick called Grace into his office and asked her about some questionable judgments she had made. He hoped her explanations would be satisfactory and he could move on with completing the audit. Why did you approve the accounting for new acquisitions of plant and equipment that were not supported by adequate underlying documentation? Why did you accept the client’s determinations of accrued expenses rather than make your own independent judgments? How can you justify relying on last year’s work papers to determine the proper allowance for uncollectibles one year later? To say Grace was stressed out would be an…
You are the audit senior on the audit of PXT Ltd for the yearended 31 January 2020. A former member of the auditengagement team for PXT Ltd left your firm two years ago totake up employment with this client.Identify and explain the potential threats to your firm’sobjectivity and independence when auditing PXT Ltd and listtwo factors you would consider when assessing thesignificance of these threats
In October 2020, the head office of Joey Limited was damaged by a fire. A lot of the company's accounting records were destroyed before the audit for the year ended 31 December 2020 took place, as Joey Limited has no practice of using electronic accounting records. The company's financial accountant has prepared financial statements for the year ended 31 December 2020 on the basis of estimates and the information he has been able to salvage. You have completed the audit of these financial statements. a) Explain how your audit report would be affected by the fire at the head office of Joey Limited and the possible audit opinions in this situation. b) Compare the responsibilities of directors and auditors regarding the published financial statement of Joey Limited.
In October 2020, the head office of Joey Limited was damaged by a fire. A lot of the company's accounting records were destroyed before the audit for the year ended 31 December 2020 took place, as Joey Limited has no practice of using electronic accounting records. The company's financial accountant has prepared financial statements for the year ended 31 December 2020 on the basis of estimates and the information he has been able to salvage. You have completed the audit of these financial statements. a) Explain how your audit report would be affected by the fire at the head office of Joey Limited and the possible audit opinions in this situation.Require:b) Compare the responsibilities of directors and auditors regarding the published financial statement of Joey Limited.