ACCT 555 External Auditing Entire Course
ACCT 555 Full Class
Chapter 2, pages 41–44: Problems 2-16, 2-17, 2-19, and 2-20
Chapter 3, pages 67–69: Problems 3-23, 3-25, and 3-26
4-18, 4-21, 4-22, 5-17, 5-19, 5-21, 5-26, 11-19, 11-20
Week 3 Homework
6-19 (Objective 6-1) The following questions concern the reasons auditors do audits. Choose the best response.
6-20 (Objective 6-3) The following questions deal with errors and fraud. Choose the best response.
6-27 (Objectives 6-6, 6-7) The following are specific transaction-related audit objectives applied to the audit of cash disbursement transactions (a through f), management assertions about classes of transactions (1 through 5), and general transaction-related audit objectives (6 through 11).
Specific Transaction-Related Audit Objective
7-25 (Objectives 7-3, 7-4) The following questions concern persuasiveness of evidence. Choose the best response.
7-26 (Objectives 7-5, 7-6) The following questions concern audit documentation. Choose the best response.
7-27 (Objective 7-4) The following are examples of documentation typically obtained by auditors:
7-28 (Objective 7-4) The following are examples of audit procedures:
8-25 (Objectives 8-1, 8-3) The following questions concern the planning of the engagement. Select the best response.
8-28 (Objectives 8-2, 8-3, 8-4, 8-5) The following are various activities an auditor does during audit planning.
9-22 (Objectives 9-1, 9-2) The following questions deal with materiality. Choose the best response.
9-23 (Objectives 9-6, 9-8) The following questions concern audit risk. Choose the best response.
9-24 (Objective 9-9) The following questions deal with audit risk and evidence. Choose the best response.
10-30 (Objectives 10-1, 10-2, 10-7) The following are general questions about internal control. Choose the best response.
Chapter 12, pages 390–397: Problems 12-17, 12-18, and 12-27
Chapter 13, pages 429–430: Problems 13-22, 13-23, and 13-24
Chapter 14 . Problems 14-21, 14-22, 14-23 14-24,
Chapter 15 Problems 15-22, 15-24, 15-25,
Chapter 16- Problem 220,21,22,24,28
Chapter 17 Problem 28
a.A factory foreman at Steblecki Corporation discharged an hourly worker but did not notify the human resources department. The foreman then forged the worker’s signature on time cards and work tickets and, when giving out the checks, diverted the payroll checks drawn from the discharged worker to his own use. The most effective procedure for preventing this activity is to
Which of the following controls will most likely justify a reduced assessed level of control risk for the occurrence assertion for purchases of inventory?
When an auditor tests a client’s cost accounting records, the auditor’s tests are primarily designed to determine that
Which of the following procedures is the auditor least likely to perform on the actual date the physical inventory count is observed?
ACCT 555 Week 7 Course Project Smackey Dog Foods Inc
ACCT 555 Midterm Answers
Test of controls OR planning OR completion
To the shareholders of Tamarak Corporation,
We have audited the accompanying balance sheet of Tamarak Corporation as of October 31, 2009, and the related statements of income, retained earnings, and cash flows for the past year. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The company has included in property and debt in the accompanying balance sheet certain lease obligations that, in our opinion, should be expensed in order to conform with generally accepted accounting principles. If these lease obligations were capitalized, property would be decreased by $4,000,000, long-term debt by $2,000,000, and retained earnings by $180,000 as of October 31, 2009, and net income and earnings per share would be decreased by $180,000 and $0.62, respectively, for the past year.
Rule # _____ Violation? Yes or No.
Provide a one- or two-line explanation.
Auditor Tex Gato of the CPA firm Smackey and Smackey, CPAs, enjoyed auditing his favorite client, Super Pup Dog Food, because the client would allow him to take home to his dog a variety of dog food samples that amounted to a year’s worth of dog food.
Rule # _____ Violation? Yes or No.
Provide a one- or two-line explanation.
Howard Cunningham & Co., CPAs, designates its firm as Members of the American Institute of Certified Public Accountants. All of the partners of the firm are CPAs. However, one of the partners has recently chosen to allow her membership to lapse because of personal reasons.
A – Foot
B – Compute
C – Scan
D – Inquire
E – Count
F – Trace
G – Recompute
H – Read
I – Examine
J – Observe
K – Compare
_____ 1: A calculation done by the auditor independent of the client
_____ 2: Addition of a column of numbers to determine if the total is the same as the client’s
_____ 3: A comparison of information in two different locations
_____ 4: A use of the senses to assess certain activities
_____ 5: Following details of transactions from original documents to journals
_____ 6: A less detailed examination of a document or record to determine if there is something unusual warranting further investigation
_____ 7: Obtaining information from the client in response to specific questions
_____ 8: A determination of assets on hand at a given time
_____ 9: An examination of written information to determine facts pertinent to the audit
1.(TCO A) In performing an ATTEST Engagement A CPA would be required to do what as part of the engagement? (Points : 19)
2.(TCO B) When a CPA performs an Audit the Client is always looking to receive a “CLEAN OPINION” or an Unqualified Opinion. Explain what your client must do for a CPA to justify that Unqualified Opinion? (Points : 19)
3.(TCO C) – Based upon the below 4 situations – explain your position of “why” or “why not” the following circumstances would have violated the professions ethical standards when you are a practicing CPA?
4.(TCO D) Discuss five steps individual practicing auditors can take to minimize their legal liability.(Points : 19)
5.(TCO F) Sarbanes Oxley requires that per Section 404 that Internal Controls within a publicly held company are to be reviewed, evaluated and tested at year end to insure that adequate controls are in place. In addition to understanding the Internal Controls present within your client’s company, the auditor must also evaluate whether these controls are in place, and implemented. How does an auditor evaluate these controls to see that they are working and in place?(Points : 19)
2.(TCO G) Business risk must be assessed in performing an audit.
(a) Define business risk in association with an audit and describe several sources of such risk.
(b) How does business risk relate to the performance of preliminary analytical procedures in an audit?
(c) There are four major areas in planning an audit engagement and there are subparts to each of the four major areas. Please identify the four major areas and the subparts that are associated with the major areas.(Points : 30)
3.(TCO H) Audit Risk consists of inherent risk, control risk, and detection risk.
(a) Please completely define each of the above.
(b) Indicate whether each of the statements below is true or false and explain your position:
(1) The risk that material misstatement will not be prevented or detected on a timely basis by internal controls can be reduced to zero by having effective controls in place.
(2) Detection Risk is a function of the efficiency of an auditing procedure.
(3) Cash is more susceptible to theft than an inventory of coal because it has greater inherent risk?
(4) The Inherent risk of the theft of an inventory of cellphones at a mall store is greater than the misappropriation of cash at a COSTCO Store?(Points : 30)
4.(TCO I) Accounts Receivable – For each of the following, please explain if an auditor’s review of the client’s sales cutoff would detect these problems:
(a) Would excessive goods returned for credit be detected by a sales cut-off test – why or why not?
(b) Would unrecorded sales discounts be detected by a sales cut-off test – why or why not?
(c) Lapping of year-end accounts receivable be detected by a sales cut-off test – why or why not?
(d) Inflated sales for the year – could it be detected by a sales-cut-off test – why or why not?(Points : 30)
5.(TCO J) One of the major problems in a computer system is that incompatible functions may be performed by the same individual. Identify from the below choices the control compensating for inadequate segregation of duties in a computer system. Explain why you have selected your response.
(a) Echo Checks
(b) A check digit system
(c) Computer-Generated hash totals
(d) A computer access log (Points : 30)
6.(TCO K) You are the Senior Auditor for WWZ Co. and you have completed the testing of all the accounts. However, prior to issuing your report, what are at least five other procedures or reviews that must be performed prior to issuing your report? Explain your responses(Points : 30)
2.(TCO H) Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts (segments) in the financial statements. Also explain why allocating to balance sheet accounts is more common than allocating to income statement accounts. (Points: 25)
Allocating the preliminary judgment about materiality to individual segments is necessary because evidence is accumulated for segments rather than for the financial statements as a whole. Allocating to segments establishes a tolerable misstatement amount for each segment, which helps the auditor decide the appropriate audit evidence to accumulate for each segment. Most practitioners allocate materiality to balance sheet accounts rather than income statement accounts because there are fewer balance sheet than income statement accounts
The classification objective is tested by reviewing the aged trial balance for material receivables from affiliates, officers, directors, or other related parties. If notes receivable or accounts that should not be classified as a current asset are included with the regular accounts, these should also be segregated. Finally, if credit balances in accounts receivable are significant, it is appropriate to reclassify them as accounts payable