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Problem 1-36. From Auditing and Assurance Services...

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Problem 1-36. From Auditing and Assurance Services by Karen L. Hooks. Chapter 1. Barton and Sons, Inc., is a small, privately-held corporation that operates two retail stores in western Kentucky. Jorge Barton and his two sons own all of the company's stock and manage the store operations. The family takes pride in the corporation's success in terms of growing sales and lack of borrowing. The company is currently considering expansion into other regions of Kentucky and Indiana. Such expansion would likely require long-term borrowing and surrendering certain management responsibilities to non-family member employees. However, the family does not wish to sell stock in the company. Required: a. discuss the factors that would make it beneficial for the company like Barton and Sons to have an external audit. b. discuss the factors that would make it beneficial for a company like Barton and Sons to implement an internal audit function.,Problem 2-32. From Auditing and Assurance Service by Karen L. Hooks. Chapter 2. For each of the following accounts, list the five management assertions from most to least important for that account. State the reason justifying your order. Cash is completed as an example. a. Cash (in home currency) 1. existence, 2. rights, 3. presentation and disclosure, 4. completeness, 5. valuation. If cash does not exist, then non of the other assertions matter. However, even if cash is found to exist, it has to be owned by the company claiming it. Various disclosures can be required for cash, for example, if it is committed as a compensating balance. Completeness is not a big audit risk because it is unlikely that management would not report cash or that any amount omitted is material. Cash is reported at face value, so valuation is not an issue for cash unless it is in a foreign currency. b. long term debt c. officer salary expense paid through stock options d. sales revenue e. accounts receivable f. property, plant and equipment

 

Paper#1351 | Written in 18-Jul-2015

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