Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 17, Problem 9RQ
To determine
Identify the effect of the given situation on the audit report for the current year.
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You are in your second year as an auditor with Dantly and Regis, a regional CPA firm. One of the firm’s long-time clients is Mayberry-Cleaver Industries, a national company involved in the manufacturing, marketing, and sales of hydraulic devices used in specialized manufacturing applications. Early in this year’s audit you discover that Mayberry- Cleaver has changed its method of determining inventory from LIFO to FIFO. Your client’s explanation is that FIFO is consistent with the method used by some other companies in the industry. Upon further investigation, you discover an executive stock option plan whose terms call for a significant increase in the shares available to executives if net income this year exceeds $44 million. Some quick calculations convince you that without the change in inventory methods, the target will not be reached; with the change, it will. Required: Do you perceive an ethical dilemma? What would be the likely impact of following the controller’s suggestions?…
You are in your second year as an auditor with Dantly and Regis, a regional CPA firm. One of the firm's long-time clients is Mayberry- Cleaver Industries, a national company involved in the manufacturing, marketing, and sales of hydraulic devices used in specialized manufacturing applications.
Early in this year's audit, you discover that Mayberry-Cleaver has changed its method of determining inventory from LIFO to FIFO. Your client's explanation is that FIFO is consistent with the method used by some other companies in the industry.
Upon further investigation, you discover an executive stock option plan whose terms call for a significant increase in the shares available to executives if net income this year exceeds $44 million.
Some quick calculations convince you that without the change in inventory methods, the target will not be reached; with the change, it will.
Do you perceive an ethical dilemma?
What would be the likely impact of following the controller's suggestions?
Who would…
" In our opinion, the financial statements give a true and fair view of the state of the Company's affairs and have been properly prepared in accordance with the Hong Kong Companies Ordinance. "Q:The auditor found that a client has switched the inventory valuation method from weighted average method used last year to First-in-first-out method this year, and the effect is material to this year's financial statements. (i) What should the auditor consider when deciding on the suitable opinion?(ii) Suggest the possible opinions and explain the situations that give rise to each opinion.
Chapter 17 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 17 - Prob. 1RQCh. 17 - What is the function of notes to financial...Ch. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - Prob. 13RQCh. 17 - Prob. 14RQCh. 17 - Prob. 15RQCh. 17 - Prob. 16RQCh. 17 - Prob. 17RQCh. 17 - Prob. 18RQCh. 17 - Prob. 19RQCh. 17 - Prob. 20RQCh. 17 - Prob. 21QRACh. 17 - Prob. 22QRACh. 17 - Prob. 23QRACh. 17 - Prob. 24QRACh. 17 - Prob. 25AOQCh. 17 - Prob. 25BOQCh. 17 - Prob. 25COQCh. 17 - Prob. 25DOQCh. 17 - Prob. 25EOQCh. 17 - Prob. 25FOQCh. 17 - Prob. 25GOQCh. 17 - Prob. 25HOQCh. 17 - Prob. 25IOQCh. 17 - Prob. 25JOQCh. 17 - Prob. 25KOQCh. 17 - Prob. 25LOQCh. 17 - Prob. 26OQCh. 17 - Prob. 27OQCh. 17 - Prob. 28OQCh. 17 - Prob. 29OQCh. 17 - Prob. 30OQCh. 17 - Prob. 31OQCh. 17 - Prob. 32OQCh. 17 - Prob. 33PCh. 17 - Prob. 34PCh. 17 - Sturdy Corporation (a nonpublic company) owns and...Ch. 17 - Prob. 36PCh. 17 - Prob. 37PCh. 17 - Prob. 38ITCCh. 17 - Prob. 39ITCCh. 17 - Prob. 40RDC
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