...PAPER WORK WEEK SEVEN (AC553) Solution: (A) ADJUSTED GROSS INCOME: This is a measure of income and it used to establish eligibility for financial benefits. It is calculated as gross income from taxable sources minus allowable deductions. Adjusted gross income is important to individual income taxation because it controls individual qualification for numerous deductions and credits. Besides, it can affect individual eligibility for retirement plans. (B) How does ADJUSTED GROSS INCOME AFFECT: (1) Medical Deduction on Form 1040, Schedule A Only the part of medical expenses that exceed 7.5% of the amount on Form 1040, line 38 is deductible. To the extent you were not reimbursed, you can deduct the amount you paid for: Prescription medicines or insulin, Medical examination, diagnostic test etc. (2) Miscellaneous Itemized Deduction on Form 1040, Schedule A This is subject to expense that is more than 2 % of your adjusted gross income. This 2% limit can only be applied after you apply any other deduction limit. For example, unreimbursed employee expenses, Tax preparation fee, and all other expenses that will appear on line 11 of Form 1040. (3) The Deduction for Charity on Form 1040, Schedule A Donations to charity are tax deductible expenses but subject to limitation.1) you must make an assessment of the fair market value of the property you contribute. 2) You must attach IRS Form 8283 if your total non-cash contribution exceeds $500. 3) If you contribute a car...
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...Tiffany Smith Week 2 HW AC555 Chap4: did in class 5-17. (a) 3 (b) 4 (c) 1 5-18. (a) Not counting inventory correctly is difficult to detect and Yost advised them their inventory counting method was undesirable and Stuart Supply Co. said that was the only way they could count inventory and signed a statement saying that. (b) Yost followed correct auditing standards of auditing inventory and they have no contract with the bank. Yost is not responsible for Stuart Supply Co. fraud. (c) Yes the company signed a statement saying that’s the only way they can count inventory. Yost was not negligent in her audit report. The banks suit will not be successful. (d) Issues and outcomes would be the same. 5-20. (a) False, there is no contract between Martinson and Watts and Williams (b)True, if they can prove Watts and Williams knew about the misstatements (c) True, they have no written agreement (d) False, they can recover if they can prove fraud on their behalf (e) False, Martinson is not a part of the contract with Watts and Williams and Sampson Skins. 5-27. The bank will succeed, Robertson intentionally fixed the statements to look appealing to the bank so Majestic could get a loan. They left out the going concern paragraph. This is a fraudulent act committed by Robertson. Chapter 11 11-19. The auditor should collect evidence that the fraud exist. They should discuss it with the people a level above those involved and the audit committee. The report...
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...Smackey Dog Food Laton Berry AC555 Due June 21, 2011 Jean Inabinett Introductory In order for me to audit this company, they would first have to produce a financial statement for me to audit. I will be providing what I have researched and what steps I would take if I were to audit Smackey Dog Food by using some audit procedures, tests, and reports. I will discuss if there were any rules violated and why. I will also discuss if there are any risk, and legal liability involving Smackey Dog Food. I will gather all of the evidence I find to determine my conclusion in what audit opinion I will give them. The audit opinion will be based off how high of material I think will affect Smackey’s Dog Food financial statements in more than on type of account or in a high value in dollars. SEC Influence over the Audit of Smackey Dog Food Smackey Dog Food is required to file a Form 10-K annually within 60 to 90 days after the close of each fiscal year also might include audited financial statements. If Smackey is a publicly held company than, they are required to file a Form 10-Q, which contains certain financial information and requires timely auditor reviews. The financial statements required are Smackey’s balance sheet from the last fiscal year, and income statement from the last quarter. They do not have to report their statement of cash flows; the SEC does not require this. The Initial Planning of the Audit The first step would be to conduct a new client investigation done...
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...AC555 Week 5 Home work 12-17 (Objectives 12-1, 12-4) The following questions concern the characteristics of IT systems. Choose the best response. a. An IT system is designed to ensure that management possesses the information it needs to carry out its functions through the integrated actions of (1) data-gathering, analysis, and reporting functions. b. Which of the following conditions will not normally cause the auditor to question whether material misstatements exist? (1) Bookkeeping errors are listed on an IT-generated error listing. c. As general IT controls weaken, the auditor is most likely to (3) expand testing of automated application controls used to reduce control risk to cover greater portions of the fiscal year under audit. d. Which of the following is an example of an application control? (3) The sales system automatically computes the total sale amount and posts the total to the sales journal master file. 12-18 (Objectives 12-2, 12-4) The following questions concern auditing complex IT systems. Choose the best response. a. Which of the following client IT systems generally can be audited without examining or directly testing the computer programs of the system? (1) A system that performs relatively uncomplicated processes and produces detailed output. b. Which of the following is true of generalized audit software programs? (3) They each have their own characteristics that the auditor must carefully consider before...
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...Analysis of the Smackey Dog Foods, Inc. Audit AC555 – External Auditing Devry University Professor Dorothy Brandt Keller Graduate School of Management Introduction Smackey Dog Foods, Inc. is a private own dog food manufacturer. The company was started by three sisters in the suburbs of Chicago. Smackey’s clientele are veterinarians, local pet stores and groceries stores. Smackey is in the process of expansion, and the purchase of new equipment produced the demand for an independent audit. The company has two divisions, one produces regular, and the other, gourmet dog food. Keller CPA’s task is to analyze Smackey’s business environment, perform an audit and issue an opinion on Smackey’s financial statements to be used to secure a loan at the local bank for the purchase of additional manufacturer equipment. Analysis At the Keller CPA Firm we follow all SEC, and other agencies, rules and regulations. According to Arens, Elder and Beasley (2010), the SEC has influence on setting GAAP and other disclosures, it has authority to develop requirements to guide auditors and CPAs to better design and prepare audits, and financial statements. Not all SEC rules will be applied to Smackey Dog Foods, Inc.’s audit, because this company is not public held, but the auditors will follow SEC’s rules in regard to private companies and determine if the financial statements are fairly presented. (Arens, Elder & Beasley, 2010, p.31). Auditors accumulate evidence in order to reach a...
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