Problem 1 (5 Points) . For each situation (1-5), identify the most applicable AICPA rule of conduct and whether there is a violation or no violation of the rule (A-F). One or more letters may not be used. Rule 101: Independence; no violation Rule 101: Independence; violation Rule 301: Confidential Client Information; no violation Rule 301: Confidential Client Information; violation Rule 503: Commissions and Referrals; no violation Rule 503: Commissions and Referrals; violation ______ 1. Brandon Frisby, CPA, found out that his client, Uptonogood, Inc., had failed to properly account for several leases. Frisby informed Uptonogood's management that he must issue a qualified audit report and disclose the lease problem in the report. Uptonogood's management indicated that such a disclosure would constitute a disclosure of confidential information. Nevertheless, Frisby rendered the qualified audit report, including an explanatory paragraph about the inadequate lease accounting. ______ 2. Priscilla Hudson, CPA, a partner in Hudson and Danhoffer, CPAs, holds the position of honorary director for the Friends of the Symphony Orchestra, a firm audit client. ______ 3. The wife of Gerald Skoch, CPA, is the controller of Fine Corporation. Skoch is an audit partner for Barnes and Bucknell, CPAs, in their Long Island office. The Long Island office of Barnes and Bucknell audits Fine Corporation, but Skoch is not part of the audit team and provides no other services to Fine Corporation. _______4. Johnny Beacon, CPA, is the auditor of Novak Wholesale, Inc. Beacon received a 10% commission from Computer Systems, Inc. for hardware sold to Novak Wholesale, Inc. The sale was made based on Beacon's recommendation to Novak Wholesale that the company needed a new accounting information system. Beacon disclosed the commission to Novak's management. Beacon also performs an annual audit for Novak. ______ 5. Cecilia Hart, CPA, provides tax services to Myers Company. Hart received a 10% commission from Computer Systems, Inc. for hardware sold to Myers Company. The sale was made based on Hart's recommendation to Myers Company that the company needed a new accounting information system. Hart disclosed the commission to Myers' management. Problem 2 (4 Points) The audit risk model includes the four risks listed below. Place the correct letter of the type of risk with the related definition below. A. Inherent risk B. Audit risk C. Control risk D. Detection risk ___1. The probability that audit procedures will fail to produce evidence of material misstatements. ___2. The probability that material misstatements have occurred in transactions entering the accounting system. ___3. The probability that an auditor will give an inappropriate opinion on financial statements. ___4. The probability that the client's internal control policies and procedures will fail to detect material misstatements if they have entered the accounting system. Problem 3 (3 Points) : ABC Company had a major sale to XYZ Company. This ale accounted for 20% of the revenue of ABC Company. The auditors performed the audit procedures listed 1 ? 3. For each audit procedure select the ASB transaction assertion that is most likely being tested. A. Occurrence B. Completeness C. Cutoff D. Accuracy E. Classification ______ 1. The auditor reviewed the shipping documents to check the date that product was shipped to XYZ Company. ______ 2. The auditor reviewed the shipping documents to ensure that all product included in the sales revenue to XYZ had been shipped. ______ 3. The auditor reviewed the invoice sent to XYZ Company to ensure that XYZ had been properly billed. Problem 4 (10 Points) : For each of the matters below, indicate through the appropriate letter the group of generally accepted auditing standards to which the matter is most closely related. A. General standards B. Standards of field work C. Standards of reporting _______ 1. The mental attitude and impartiality of auditors. _______2. Auditors' overall conclusion of the fairness of the client's financial statements. _______3. The use of an audit program to identify audit procedures to be performed during the engagement. _______4. Auditors' assessment of control risk after performing tests of controls. _______5 Accounting firm policies with respect to the level of expected continuing professional education. _______6. Client's disclosure of all pending litigation against the client at year end. _______7. The hierarchical review process used to evaluate the appropriateness of audit documentation prepared by assistants. _______8. Auditors' requests to obtain bank statements directly from institutions with whom the client does business. _______9. The client's use of accounting principles that are consistent with those used in prior years. _______ 10. Actions taken by auditors to communicate their level of involvement with and responsibility assumed for the client's financial statements. Short Answer Questions (14 Points) 1. The CPA firm of SKL, CPAs, accepted an engagement to audit the financial statements of PINS Inc. a new client. PINS is a publicly held retailing entity that recently replaced its operating management. In the course of applying audit procedures, SKL discovered that PINS?s financial statements may be materially misstated due to the existence of fraud. Required (9 points) : (a.) Describe SKL, CPAs responsibilities in the circumstances described above. (b.) Describe SKL?s responsibilities for reporting on PINS financial statements and other communications if SKL is precluded from applying necessary procedures in searching for frauds. (c.) Describe SKL?s responsibilities for reporting on PINS financial statements and other communications if SKL concludes that PIN?s s financial statements are materially affected by fraud. 2. (5 Points) Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and nonfinancial data. They range from simple comparisons to the use of complex models involving many relationships and elements of data. They involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by auditors. Required: A. Describe the broad purposes of analytical procedures B. Identify at least three (3) sources of information from which an auditor develops expectations.,Sorry Michael, but there is no answers on this document, maybe you include the wrong sheet. Please attached correct sheet with answers.
Paper#12850 | Written in 18-Jul-2015Price : $25