Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.5CP
1.
To determine
Provide the position on the proposal and justification on the response.
2.
To determine
Provide a strong recommendation and give the basis for the recommendations.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Tana Thorne works for a public accounting company and aspires to be a partner one day. Thorne is invited by Allnet Company's management to create a proposal to audit Allnet's financial accounts. When considering the audit charge, Allnet's management offers a price range in which the amount is determined by Allnet's reported earnings. The more the profit, the greater the audit fee paid to Thorne's business. Describe some of the ethical concerns that influenced your recommendation.
Max Maxwell has been the audit engagement partner for the external (financial statement) audit of Acme Global Freight Limited (Acme), a listed company, for approximately 10 years and Acme has been an audit client of Max’s accounting firm, Maxwell & Partners, for nearly 30 years. Max’s daughter has just accepted a job with Acme as a group accountant. This role would entitle Max’s daughter to share options in Acme as part of her remuneration package. Acme has just awarded an assignment to advise on the tax treatment of complex financial transactions to a tax partner of Maxwell & Partners. The managing director of Acme has invited Max as a guest to Acme’s corporate box for an upcoming super rugby game and he has also asked if Max would mind accompanying him on some visits to investments banks to discuss Acme raising new share capital. An accounting partner at Maxwell & Partners has seconded a staff member to Acme for a 3-month period to cover for one of Acme’s accountants who…
Max Maxwell has been the audit engagement partner for the external (financial statement) audit of Acme Global Freight Limited (Acme), a listed company, for approximately 10 years and Acme has been an audit client of Max’s accounting firm, Maxwell & Partners, for nearly 30 years. Max’s daughter has just accepted a job with Acme as a group accountant. This role would entitle Max’s daughter to share options in Acme as part of her remuneration package. Acme has just awarded an assignment to advise on the tax treatment of complex financial transactions to a tax partner of Maxwell & Partners. The managing director of Acme has invited Max as a guest to Acme’s corporate box for an upcoming super rugby game and he has also asked if Max would mind accompanying him on some visits to investments banks to discuss Acme raising new share capital. An accounting partner at Maxwell & Partners has seconded a staff member to Acme for a 3-month period to cover for one of Acme’s accountants who…
Chapter 1 Solutions
Financial Accounting
Ch. 1 - Define accounting.Ch. 1 - Briefly distinguish financial accounting from...Ch. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5QCh. 1 - Complete the following: Name of Statement...Ch. 1 - What information should be included in the heading...Ch. 1 - What are the purposes of (a) the income statement,...Ch. 1 - Explain why the income statement and the statement...Ch. 1 - Prob. 10Q
Ch. 1 - Prob. 11QCh. 1 - Explain the equation for the income statement....Ch. 1 - Explain the equation for the balance sheet. Define...Ch. 1 - Explain the equation for the statement of cash...Ch. 1 - Explain the equation for retained earnings....Ch. 1 - The financial statements discussed in this chapter...Ch. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - (Supplement A) Briefly differentiate between a...Ch. 1 - Prob. 20QCh. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 2MCQCh. 1 - Prob. 3MCQCh. 1 - Which of the following regarding retained earnings...Ch. 1 - Which of the following is not one of the four...Ch. 1 - Prob. 6MCQCh. 1 - Prob. 7MCQCh. 1 - Which of the following is true regarding the...Ch. 1 - Prob. 9MCQCh. 1 - Prob. 10MCQCh. 1 - Matching Elements with Financial Statements M1-1...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Prob. 1.3MECh. 1 - Prob. 1.1ECh. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Matching Financial Statement Items to Financial...Ch. 1 - Preparing a Balance Sheet Honda Motor Corporation...Ch. 1 - Completing a Balance Sheet and Inferring Net...Ch. 1 - Prob. 1.6ECh. 1 - Preparing an Income Statement and Inferring...Ch. 1 - Prob. 1.8ECh. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Inferring Values Using the Income Statement and...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing a Statement of Stockholders Equity...Ch. 1 - Focus on Cash Flows: Matching Cash Flow Statement...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Student's Business and Preparing an...Ch. 1 - Comparing Income with Cash Flow (Challenging)...Ch. 1 - Evaluating Data to Support a Loan Application...Ch. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Analyzing a Students Business and Preparing an...Ch. 1 - Prob. 1.3APCh. 1 - Prob. 1.1CONCh. 1 - Finding Financial Information LO1-1 Refer to the...Ch. 1 - Prob. 1.2CPCh. 1 - Comparing Companies within an Industry Refer to...Ch. 1 - Using Financial Reports: Identifying and...Ch. 1 - Prob. 1.5CPCh. 1 - Prob. 1.6CPCh. 1 - Prob. 1.7CP
Knowledge Booster
Similar questions
- Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different for-profit and not-for-profit entities. Two years ago, Luisa Mellina, Ginnians partner in charge of operations, became concerned about the amount of audit time required by not-for-profit entities. As a result, she instituted a series of training programs focusing on the auditing of not-forprofit entities. Now, she would like to see if the training seemed to work. So, she ran a multiple regression on 22 months of data for Ginnian for three variables: the total monthly cost of audit professional time, the number of not-for-profit audits, and the hours of training in the audit of not-for-profit entities. The following printout was obtained: Required: 1. Write out the cost equation for Ginnians audit professional time. 2. If Ginnian expects to have 9 audits of not-for-profits next month and expects that audit professionals will have a total of 130 hours of not-for-profit training, what is the anticipated cost of professional time? 3. Are the hours spent auditing not-for-profit entities positively or negatively correlated with audit professional costs? Is percentage of experienced team members positively or negatively correlated with audit professional cost? 4. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of audit professionals?arrow_forwardTana Thorne works at a public accounting business and aspires to be a partner one day. Thorne is invited to create a proposal to audit Allnet's financial accounts by the company's management. When considering the audit charge, Allnet's management offers a price range in which the amount relies on Allnet's reported earnings. The larger the profit, the higher the audit fee paid to Thorne's business. Describe any ethical factors that influenced your recommendation.arrow_forwardThree situations have arisen with audit clients of your firm 1. Renato Casillo has acted as engagement partner on the audit of A company, a public company, for many years 2. Overdue fees from E Co, a private limited Co. have built up to include all bills submitted by your firm in the last twelve months 3. The partners and staff involved in the audit of W Co. a private limited liability co. have been invited to the co's annual summer social event, a dinner dance and weekend at an exclusive spa hotel. :: Required Using the conceptual framework of ethics and conduct, for each of the three situations explain: a) The nature if the threat faced by the audit firm, and b) The appropriate safeguards that should be put in place.arrow_forward
- Tana Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussing the audit fee, Allnet’s management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm. Describe some ethical considerations guiding your recommendation.arrow_forwardTana Thorne works in a public accounting firm and hopes to eventually be a partner. The managementof Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussingthe audit fee, Allnet’s management suggests a fee range in which the amount depends on thereported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm. Identify the parties potentially affected by this audit and the fee plan proposed.arrow_forwardwords) You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 20X7. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. (i) 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 realised a small profit for the company through foreign-exchange transactions in yen. (ii) Sampson has planned to close an inefficient factory in country New South Wales before the end of 20X7. It is expected that the redeployment and disposal of the factory’s assets will not be completed until the end of the following year. However, the financial controller is confident that he will be able to determine reasonably accurate closure provisions. (iii) To help achieve the…arrow_forward
- Tana Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to prepare a bid to audit Allnet’s financial statements. In discussing the audit fee, Allnet’s management suggests a fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne’s firm. Who are the parties potentially affected by this audit and the fee plan proposed? What are the ethical factors in this situation? Explain. Would you recommend that Thorne accept this audit fee arrangement? Why or why not? What are some ethical considerations guiding your recommendation?arrow_forwardTana Thorne is an accountant who aspires to become a partner in a public accounting company. Thorne is invited by Allnet Company's management to submit a proposal to audit Allnet's financial accounts. When considering the audit charge, Allnet's management offers a price range based on Allnet's reported earnings. The more the profit, the greater the audit fee payable to Thorne's business. What ethical considerations apply to this situation? Explain.arrow_forwardYou are the audit senior with HLAM Chartered Accountants. Your audit manager Michael Lim has just assigned you to the audit of Fiabci Malaysia Limited (Fiabci) for the year ended 31 December 2020. The reason behind your assignment to Fiabci Limited’s audit was that you had recently been seconded for nine months to work with Fiabci’s financial reporting department. Your client is a property developer. Michael feels that your knowledge of Fiabci’s business will aid in increasing the efficiency of the current year’s audit. Fiabci has a reasonably steady growth in 2020, with sales holding up despite increasing competition from other property developers. Required (a) Identify and explain the significant threats to potential ethical problems in the audit of Fiabci Limited. (b) Suggest any relevant and practical safeguards you feel may be appropriate for the issues identified.arrow_forward
- Accounting & Finance - Auditing Question: Your audit firm has an advertising policy that any audit process will not take more than 20 days for any client. You start reviewing the audit files of your client ALB plc which you audit for eight years and you find the following notes. The audit team included a manager who owns 1% of the ALB’s shares. The executive partner believes that the 1% is too small and it will not affect the manager experience. Your firm offered this client a bookkeeping service for this year. One of the audit team received a high salary offer to be appointed in the client’s internal audit department as a head of department. The finance director was recently working as an auditor in your audit firm. ALB plc intends to increase its capital by issuing more shares in the stock market and the financial manager is asking your firm to manage this process. Required: Identify and explain FIVE ethical threats which arise from the above actions and for each ethical…arrow_forwardII. Case Studies / Problem Solving . Below are summaries of cases studied in class. Please read each case, analyze the facts, and provide a brief solution to the problem. The auditors of JKL Company are about to conclude their audit. Before they completely finish, they observe a pre-publication copy of the company’s annual report to shareholders in the CFO’s office. In the annual report, the auditors read that the company is seeking to expand its operation by acquiring a small firm. Should the auditors react to this information? What ought they do?arrow_forwardMadison Thorne works in a public accounting firm and hopes to eventually be a partner. The management of Allnet Company invites Thorne to pepare a bid to audit Allnet's financial statements. In discussing the audit fee, allnet's management suggestsua fee range in which the amount depends on the reported profit of Allnet. The higher its profit, the higher will be the audit fee paid to Thorne's firm. 4. Describe some ethical considerations guiding your recommendation.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub