FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
W20 Edition
ISBN: 9780136615583
Author: REIMERS
Publisher: PEARSON C
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Chapter 11, Problem 7SE
To determine
Identify the purpose of rotating the lead auditor and reviewing partner once in 5 years and the if the purpose is achieved or not.
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According to SOX rules that mandate auditor rotation, the lead audit partner on an engagement is prohibited from providing those services for a client for greater than five consecutive years. The purpose of the rule is to encourage professional skepticism. Discuss the costs and benefits of auditor rotation as you see it. Do you think audit firms should be rotated periodically?
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…
Chapter 11 Solutions
FINANCIAL ACCT(HARDBK)+MYACCTGLAB>ICB<
Ch. 11 - Describe why earnings is such an important number.Ch. 11 - Prob. 2YTCh. 11 - Prob. 3YTCh. 11 - Prob. 4YTCh. 11 - Prob. 5YTCh. 11 - Prob. 1QCh. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Prob. 4QCh. 11 - Prob. 5Q
Ch. 11 - Prob. 6QCh. 11 - Prob. 7QCh. 11 - Prob. 8QCh. 11 - Prob. 9QCh. 11 - Prob. 10QCh. 11 - Prob. 11QCh. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 1MCQCh. 11 - Prob. 2MCQCh. 11 - Prob. 3MCQCh. 11 - Prob. 4MCQCh. 11 - Prob. 5MCQCh. 11 - Prob. 1SECh. 11 - How do you think analysts evaluate the quality of...Ch. 11 - Prob. 3SECh. 11 - Prob. 4SECh. 11 - Prob. 5SECh. 11 - Prob. 6SECh. 11 - Prob. 7SECh. 11 - Prob. 8SECh. 11 - Prob. 9SECh. 11 - Prob. 10SECh. 11 - Prob. 11SECh. 11 - How does U.S. GAAP differ from IFRS in the way...Ch. 11 - Prob. 13SECh. 11 - Prob. 14ECh. 11 - Loder Company had a good year, and recorded a...Ch. 11 - Mismatch Company had a terrible year and will...Ch. 11 - Chip Company is making estimates of had debts and...Ch. 11 - Prob. 1IECh. 11 - Prob. 2IECh. 11 - Prob. 3IE
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- 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…arrow_forwardWhich of the following conditions most likely would pose the greatest risk in accepting a new audit engagement?a. Staff will need to be rescheduled to cover this new client.b. There will be a client-imposed scope limitation.c. The firm will have to hire a specialist in one audit area.d. The client’s financial reporting system has been in place for 10 years.arrow_forwardAnn Johnson has audited the financial report of Quick Ltd for the year ended 30 June 2020. Although Ann’s audit fieldwork was completed on 14 August 2020, her auditor’s report was signed on 20 August 2020 and sent to management that day. The management of Quick Ltd advised Ann that their annual report, which will be mailed to shareholders on 10 October 2020, will also include an unaudited financial report for the first quarter ended 30 September 2020. Under the circumstances, Ann is responsible for undertaking subsequent events audit procedures through to:Select one:a. 10 October 2020b. 20 August 2020c. 14 August 2020d. 30 September 2020arrow_forward
- According to the Standards for the Professional Practice of Internal Auditing, internal auditors must be objective in performing audits. Assume that the internal audit director received an annual bonus as part of that individual’s compensation package. When may the bonus be impaired?arrow_forwardYou are an audit senior of Beckham & Co and have been allocated to the audit of Willian Co (Willian), a listed company which has been an audit client for eight years and specializes in manufacturing musical instruments.Spice Posh was the audit engagement partner for Willian and as she had completed seven years as the audit engagement partner, she has recently been rotated off the audit engagement. The current audit partner, ShakiraPique, has suggested that in order to maintain a close relationship with Willian, Spice should undertake the role of independent review partner this year. In addition, Willian has requested that Spice assist them by attendingtheir audit committee meetings, as a non-executive director has recently left the company. Willian has also asked Shakira and the other partners at Beckham & Co to help them in recruiting a new non-executive director.The total fees received by Beckham & Co for last year equated to 16% of the firm’s total fee income. The…arrow_forwardYou are an audit senior of Beckham & Co and have been allocated to the audit of Willian Co (Willian), a listed company which has been an audit client for eight years and specializes in manufacturing musical instruments. Spice Posh was the audit engagement partner for Willian and as she had completed seven years as the audit engagement partner, she has recently been rotated off the audit engagement. The current audit partner, Shakira Pique, has suggested that in order to maintain a close relationship with Willian, Spice should undertake the roleof independent review partner this year. In addition, Willian has requested that Spice assist them by attending their audit committee meetings, as a non-executive director has recently left the company. Willian has also asked Shakira and the other partners at Beckham & Co to help them in recruiting a new non-executive director. The total fees received by Beckham & Co for last year equated to 16% of the firm’s total fee income. The…arrow_forward
- The firm of Bulaklak and Bubuyog, CPAs, has two offices, one in Quezon City and one in Solano, Nueva Vizcaya. The firm has audited the Hardin Corporation out of its QC office for the past 5 years. For each of the following independent cases, which occurred during the year under audit, indicate whether the independence of either (1) the CPA involved or (2) the firm would be impaired. Bango Bulaklak, a partner in the Solano Branch, fell wildly in love with Jerry Bee, the treasurer for Hardin Corporation. They were married in Las Vegas. During the week, Bulaklak still lives in Solano and works in that branch, while Jerry Bee lives in QC, working for Hardin. On weekends they commute to their home in Santiago City. Bulaklak does not participate in the engagement. Big Bubuyog is the father of Small Bubuyog, a QC partner. Big B has a material investment in Hardin. Small B is unaware of his father’s investment, but does participate in the engagement. Sally, a senior in the Solano office, has…arrow_forwardAJ Kumar is completing the December 31, 2020, audit of Kiwi Company. As part of the final procedures, Kumar has requested representations from Kiwi’s management regarding their assertion as to the fairness of the financial statements and other important matters addressed by professional standards. Because Kiwi’s management is attending an analyst briefing in the upcoming week, Kumar receives these signed representations dated February 6, 2021. Kumar has a few remaining items to complete, does so, and dates the auditor’s report February 9, 2021. Describe the most appropriate course of action that the auditors should take.arrow_forwardA staff auditor had just begun work and was assigned to a client that her supervisor, a senior auditor, had worked for many years. Her supervisor assigned her to this client and sent an email welcoming her to the client and providing details and files regarding the client. Among the information included in the email was the client's general ledger, her expected work hours during the busy season, and her assigned audit sections. The supervisors of the new staff auditor requested a meeting to get her acquainted with the position and answer any questions she may have. What questions should the staff auditor ask her supervisor, a senior auditor who has worked for her assigned client for many years?arrow_forward
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