EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 4, Problem 24DQP
To determine
Use the three-step process in the AICPA conceptual framework to assess if Person M independence is impaired for the situations given.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
As the auditor for Company A, you discover that a material sale ($500,000 sale; cost of goods of $300,000) was made to a customer this year. Because of poor internal accounting controls, the sale was never recorded. Your client makes a management decision not to bill the customer because such a long time has passed since the shipment was made. You determine, to the best of your ability, that the sale was not fraudulent. Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction.
Instructions:
Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction. Please make sure to use at least 100 words in your response. Once you give your response, please respond to at least two of your peers using at least 50 words in your responses. Remember to follow the netiquette guidelines found in the course…
Is it an entity inherent risk for the information below?
Supervisors working at Marco Inc. interview all perspective employees for positions they supervise. In addition, at least one of the corporate officers also interviews each perspective employee. Most of the key employees, including the officers, have been with Marco for more than ten years. However, due to the high demand for accountants, Stephen Violet an accountant and most of the accounting staff have been employed at Marco for less than 3 years. While Marco checks references for any prospective employee, they do not check criminal records or perform other forms of background checks.
If it is an inherent risk, what is the feature of the firm that will possibly affect inherent risk and explain how and why; that is whether it increases or decreases inherent risk. Please address a specific risk to the accuracy of the financial statements with the "how" and whether audit effort should be increased or decreased for specific…
Jim Fallon was recently promoted to senior accountant. He was put in charge of the Fresh Eats audit because of his experience with other grocery clients. Fresh Eats has a small, but growing chain of natural food stores. This is the first year Fresh Eats has been audited. Because of its growth, Mellow needs additional capital. Mellow intends to take its audited financial statements to a bank to secure a loan.
Jim has been assigned two inexperienced staff assistants for the audit. Because this is his first audit as a senior, he intends to bring the job in on budget. To save time, he gave the assistants the audit program for Happy Time Food Stores. He told his staff that this would make things go more quickly. He also told them that he could not spend much time with them at the client's place of business because "my time is billed out at such a high rate, we'll go right over budget." He did call them once a day from another audit on which he was working. The assistants told Jim that the…
Chapter 4 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
Ch. 4 - Prob. 1RQCh. 4 - Describe an ethical dilemma. How does a person...Ch. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 8RQCh. 4 - Prob. 9RQCh. 4 - Prob. 10RQ
Ch. 4 - Assume that an auditor makes an agreement with a...Ch. 4 - Prob. 12RQCh. 4 - Prob. 13RQCh. 4 - Prob. 14RQCh. 4 - Prob. 15RQCh. 4 - Prob. 16RQCh. 4 - Prob. 17.1MCQCh. 4 - Prob. 17.2MCQCh. 4 - Prob. 17.3MCQCh. 4 - Prob. 18.1MCQCh. 4 - Prob. 18.2MCQCh. 4 - Prob. 18.3MCQCh. 4 - Prob. 19.1MCQCh. 4 - Prob. 19.2MCQCh. 4 - Prob. 19.3MCQCh. 4 - Prob. 20DQPCh. 4 - Prob. 21DQPCh. 4 - Prob. 22DQPCh. 4 - Prob. 23DQPCh. 4 - Prob. 24DQPCh. 4 - Prob. 25DQPCh. 4 - Prob. 26DQPCh. 4 - Prob. 27DQPCh. 4 - Prob. 28CCh. 4 - Prob. 29CCh. 4 - Prob. 30C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Sarah, a friend of yours, recently started her own business, The Bike and Boulder Company (B&B). B&B specializes in the sales of mountain bikes and rock climbing equipment. Sarah is putting the finishing touches on her company policies and procedures. She knows you are taking a fraud class and asks you to review what she has completed thus far. You quickly notice that Sarah has neglected to address fraud and fraud prevention in her policies and procedures. What policies and procedures would you suggest Sarah implement to prevent and detect fraud at B&B?arrow_forwardMr. Arty works for Smile Accounting Firm as a senior accountant. Currently, he is doing a review of rental property compliance testing of rental receipts and expenses of the property owned by the client. He determines that the staff accountants tested only two tenants per property, instead of the three required by the audit program based on materiality considerations. However, to request more information from the client would cause massive delays, and the manager on the engagement is pressing hard for the information now. The manager did approach the client, who stated that she “needed the report yesterday.” The manager reminds Arty that no problems were found from the testing of the two properties, in past years the workpapers called for just two properties to be reviewed, the firm has never had any accounting issues with respect to the client, and he is confident the testing is sufficient. Explain the relationship between the manager’s explanations and the judgment tendencies.arrow_forwardRead the following information and then answer questions a & b below: Assume you are an internal auditor for a large, multinational, manufacturing organization with a division in Mexico. One of your responsibilities is to investigate allegations made on the company’s fraud hotline. When you arrive at work one morning you learn an anonymous tip was left on the hotline that alleges fraud involving the division manager. “Pat’s significant other is a fraudulent vendor,” was the anonymous tip left on your company’s fraud hotline. Pat is a division manager at your company. “Wow. I can’t believe this guy is so blatant,” you are thinking as you review some accounts payable invoices while following up on this anonymous tip. A quick search of the AP file reveals a total of three invoices like the one, all for identical amounts but on different dates. The division manager, Pat, has the authority to approve payment of invoices for less than $10,000. It is obvious to you that the manager has…arrow_forward
- Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management has promised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. Required:(a) Explain the ethical problem in this case. Why is it a problem?). (b) What can be done about it?arrow_forwardDave 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.arrow_forwardLiona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management haspromised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. 4Required:(a) Explain the ethical problem in this case. Why is it a problem? (b) What can be done about it?arrow_forward
- Liona is the managing partner of Ross and Associates, a small audit firm. Liona's role includesmanaging the business affairs of the firm, and she is very worried about the amount of feesoutstanding from audit clients. Broomers Pty Ltd, one of the client of Ross and Associates, hasnot paid its audit fees for two years despite numerous discussions between Liona, their auditpartner Ball, and the management of Broomers Pty Ltd. Broomers Pty Ltd's management haspromised the fees would have been paid before the audit report for this year has beenpublished, Liona rang Ball this morning to ensure that the audit report was not issued becauseBroomers Pty Ltd had paid only 10 per cent of the outstanding account. She discovers thatBall is about to sign the audit report. 4Required:(a) Explain the ethical problem in this case. Why is it a problem? (150 – 200words)(b) What can be done about it? (50 – 100 words)arrow_forwardThe firm of McGraw and West, CPAS, has two offices, one in Phoenix and one in San Diego. The firm has audited the Cameron Corporation out of its Phoenix office for the past five years. For each of the following independent cases, which occurred during the year under audit, indicate whether Independence would be impaired. a. Mary McGraw, a partner in the San Diego office, fell wildly in love with Bill Smith, the treasurer for Cameron Corporation. They were married in Las Vegas. During the week, McGraw still lives in San Diego and works in that office, while Bill Smith lives in Phoenix, working for Cameron. On weekends they commute to their home In Yuma. Mary does not participate in the engagement. b. Jim West is the father of Will West, a Phoenix partner. Jim West has a material Investment in Cameron. Will West is unaware of his father's Investment but does participate in the engagement. c. Bill Johnson, a senior in the San Diego office, has a material Investment in the capital stock of…arrow_forwardDaisy CPAS are auditing the accounts of Focus Inc., a regional power cooperative. The audit team assigned to the audit of accounts receivable has noted from prior audit experience that the majority of clients pay their bills on time and in the correct amount. One of the audit team has also noted that the cooperative has hundreds of thousands of customers. Based on this information, what might be a prudent approach to substantive testing by Daisy CROS?arrow_forward
- Ja'Niya, a recent college graduate has started working for Cline CPA Firm. Ja'Niya is currently taking part in her first audit, and is discussing the management letter with her supervisor, Jamie. Jamie has just explained why the CPA firm sends management letters to its audit clients, however Ja'Niya is still confused as to the purpose of the letter and asks Jamie to provide some examples of items that might be in the letter. Which of the following would represent examples of items that an auditor might apprise management of in a management letter? • Generally accepted auditing standards require drafting and transmittal of the management letter by the external auditors for all public and private clients. Once the management letter has been received by management, the auditors' requests written assurances from management confirming the effectiveness of internal controls in the noted areas. • The external auditing firm might use a management letter to communicate important matters and…arrow_forwardDave 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.arrow_forwardJohn Josephs an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of the local Small Business Administration Association. The president of the association has suggested that he talk about the various phases of the audit process. John has asked you, his trusted assistant, to prepare an outline for his speech. He suggests that you answer the following. Required: A) List and describe the various phases of an audit. B) Describe how audit procedures designed for one purpose might provide evidence for other purposes. Give an example. C) One of the phases involves understanding an entity's internal control. Why might the members of the association be particulary interested in the work conducted by auditors in this phase of the audit?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Ethical Decision Making in Management; Author: GreggU;https://www.youtube.com/watch?v=6UrBO-cL27Q;License: Standard Youtube License