...Zac Johnson ACCT 7401 Individual Assignment 1 3/25/2015 Sarah Jones Case Frame the ethical issue The ethical issue in this case deals with Sarah Jones independence of conducting the audit of FNB because her parents are dependent on the dividends from their significant investment in the bank. Gather all the facts Sarah Jones serves as an auditor in charge at a reputable accounting firm Trout & Cod CPA firm. She supports her family financially while her husband is a stay-at-home dad taking care of their two kids. During the audit of First National Bank (FNB), Sarah discovered that several significant commercial loans had deteriorated since the previous audit. Sarah believes that the reserves are not adequate because of the deteriorating loans and because of this she estimates the stock price could drop from $45 a share to below $18 with dividends being discontinued. Her situation becomes an ethical issue when she finds out that her parents invested nearly 25% of their retirement funds in FNB’s common stock. Her parent’s investment does not conflict with the CPA firm’s conflict of interest policy because her parents are not dependent on Sarah. Identify the stakeholders and obligations Trout & Cod CPA firm: Sarah’s obligations to the firm is to maintain the high standards and strong reputation that the firm has built. First National Bank: Sarah’s obligations to the FNB is to ensure that she provides professional services to the best of her ability. Shareholders...
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...isA 570, going concern hAs been A well-esTAblished source of guidAnce for AudiTors. AddiTionAl direcTion hAs been provided by The iAAsb’s prAcTice AlerT AudiT considerATions in respecT of going concern in The currenT economic environmenT, issued in JAnuAry 2009. relevAnT To AccA QuAlificATion pAper p7 The recent global economic crisis, commonly referred to as the credit crunch, has provided many challenges for both the preparers and the auditors of published financial statements. For auditors, ISA 570, Going Concern is a well-established source of guidance, and additional direction has been provided by the IAASB’s Practice Alert Audit Considerations in Respect of Going Concern in the Current Economic Environment, issued in January 2009. In the UK, the APB issued the Bulletin Going Concern Issues During the Current Economic Conditions in December 2008. Both of these are examinable documents for the Paper P7 exams in 2010. The auditor’s objectives in relation to going concern ISA 570 contains well-established guidance on going concern, including the following objectives for the auditor: ¤ to obtain sufficient appropriate audit evidence regarding the appropriateness of management’s use of the going concern assumption in the preparation of the financial statements ¤ to conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and ¤ to...
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...2308/iace-50298 Going Concern Designations and GAAP versus Non-GAAP Earnings Metrics James L. Bierstaker, Thomas F. Monahan, and Michael F. Peters ABSTRACT: Many students have not spent much time studying or contemplating the importance of non-GAAP (Generally Accepted Accounting Principles) earnings to the ‘‘Street.’’ Based on the facts of an actual company and utilizing the financial information drawn from this company’s 10-K and Earnings Release, this case introduces students to the strengths and weaknesses of GAAP and non-GAAP earnings measures, and why the Street might be more interested in cash and recurring earnings in attempting to predict movements in stock price. It also provides the instructor with an opportunity to discuss the dangers of allowing firms to emphasize earnings in their press releases that are not defined by an external authoritative body (such as the Financial Accounting Standards Board [FASB]), and how this can hurt the consistency and reliability of reporting. This is an important discussion, since regulators have recently formally proposed to include non-GAAP measures in their overhaul of the auditor reporting model (Public Company Accounting Oversight Board [PCAOB] 2011). The case also familiarizes students with current auditing guidelines dealing with the going concern decision and the potential role that non-GAAP earnings can play in this decision. Thus, the three primary learning objectives are to teach students: (1) to apply going concern audit standards...
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...surance Standards B Auditing and Assurance Standards Council Philippine Standard on Auditing 570 (Redrafted) GOING CONCERN PSA 570 (Redrafted) PHILIPPINE STANDARD ON AUDITING 570 (REDRAFTED) GOING CONCERN (Effective for audits of financial statements for periods beginning on or after December 15, 2009) * CONTENTS Paragraph Introduction Scope of this PSA................................................................................................ Effective Date..................................................................................................... Objectives........................................................................................................... Requirements Risk Assessment Procedures and Related Activities.......................................... Evaluating Management’s Assessment.............................................................. Period beyond Management’s Assessment......................................................... Additional Audit Procedures When Events or Conditions Are Identified.......... Audit Conclusions and Reporting....................................................................... Use of Going Concern Assumption Appropriate but a Material Uncertainty Exists……………………………………….……… Use of Going Concern Assumption Inappropriate............................................. Management Unwilling to Make or Extend Its Assessment.............................. Communication with Those Charged with Governance............
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...Assurance on sustainability reports: An International Comparison (1) Archival study ! global compustat I. Abstract Identify the factors associated with: Decision to voluntary purchase assurance The choice of the assurance provider A company needs to enhance credibility through assurance and choice of assurance provider will be a function of company, industry and country related factors. Findings: Companies seeking to enhance the credibility of their reports and build their corporate reputation are more likely to have their sustainability reports assured, although it doesn’t matter whether the assurance provider comes from the auditing profession. Companies domiciled in more stakeholder-oriented countries are more likely to choose a member of the auditing profession II. Introduction Purpose ! understand emerging assurance market and the role of assurance in establishing corporate credibility Why buy assurance? Increased stakeholder or user confidence in the quality of the sustainability information provided Increased stakeholder trust in the level of organizational commitment to sustainability agendas III. Literature review on voluntary assurance Why report? Informing stakeholders ! reducing information asymmetry Reporting also attests to organizational commitment, risk management, and a desire to build a corporate reputation Demand for assurance stems from the need to mitigate information asymmetry with institutional creditors. The auditing profession has well developed global...
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...to fix their situation. b. After the auditor determines that substantial doubt exists about the client’s ability to continue as a going-concern, he should talk to management about what they plan on doing about it and how effective their plan will be if they can even be implemented. c. The auditor should focus on elements of management’s plan that would play a significant role in overcoming the adverse conditions causing the going-concern. Not only should the auditor look for these specific elements of management’s plan, but he should also consider how accurate management’s assertions about the effectiveness of their plan will be. For example, if the plan is to sell assets, the auditor should consider the marketability of the asset and what the company will likely get for its disposition. d. If the auditor still doubts the company’s ability to continue as a going-concern, he is to put an explanatory paragraph after the opinion paragraph using the words “substantial doubt” and “going concern”. e. If, after reviewing management’s plans, the auditor does not believe there is substantial doubt, he should consider a disclosure that states the conditions that made him think there was a going-concern problem in the first place. 3. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note X to the financial statements, the...
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...This paper is an overall assessment of the financial fraud that occurred at Worldcom. This paper will show that if an operational audit had been conducted how it could have uncovered the fraud at an earlier time. | Initial Survey and Engagement Development In the introduction survey there are several topics that should have been discussed in the initial survey and engagement development for an audit of Worldcom. When reading the Worldcom case the very first thing that I noticed was there was no written Delegation of Authority (dag). No one really had the ability to say no and there was no approval process for any type money or asset and liability transfers. When the accrual transfers took place, there were people that knew it was bad accounting but they did not have the ability to say no, and if they did, there job was threatened. This in general seems to me to put this company at a very high risk for fraud. Once this dag is established there is a line of signatures that must be obtained in order for anything in regards changes in the accounts to take place must have the correct signature according to the amount of money that is being adjusted. Another question in the initial survey would be a request for information (ROI) in regards to the accounting structure and the accounts that are involved in the area that is going to be audited. Also a ROI for all accrual accounts and back up information for payments. Asset accounts and deposit information will also need to be reviewed...
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...Otherwise, only the first answers to hand for these four questions will be marked.) TIME ALLOWED: 3 hours, plus 10 minutes to read the paper. INSTRUCTIONS: During the reading time you may write notes on the examination paper but you may not commence writing in your answer book. Marks for each question are shown. The pass mark required is 50% in total over the whole paper. Start your answer to each question on a new page. You are reminded that candidates are expected to pay particular attention to their communication skills and care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of your answers and the extent to which answers are supported with relevant legislation, case law or examples, where appropriate. List on the cover of each answer booklet, in the space provided, the number of each question(s) attempted. The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2. THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND AUDITING PROFESSIONAL 1 EXAMINATION - APRIL 2011 Time Allowed: 3 hours, plus 10 minutes to read the paper. Section A - You are required to answer Questions 1, 2 and 3. Section B - You are required to answer any two out of Questions 4, 5, 6 and 7. (If you provide answers to more than two questions in this section, you must draw a clearly distinguishable line through the answer(s) not to be marked. Otherwise, only the first answers to hand for these four...
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...Surfer Dude, Inc. Substantial doubt will result in an unqualified audit opinion. An explanatory paragraph regarding the uncertainties is explained to reveal the auditors conclusion. "If the auditor concludes that the entity’s disclosures with respect to the entity’s ability to continue as a going concern are inadequate, a departure from generally accepted accounting principles exists." (Boynton & Johnsonp.907) Mark may also state an adverse opinion to reflect a departure from GAAP, or he could disengage himself from the audit. A going concern explanatory paragraph may cause a “self-fulfilling prophecy” for Surfer Dude, Inc. Mr. Baldwin’s concerns regarding a going concern report are for the future of the company. He believes, as most management, that substantial doubt of going concern would be the start of failure for the company. Baldwin is concerned with the company’s ability to obtain loans or order supplies on account if a doubt for going concern is presented in the audit report. The reputation of the company is also at risk when the going concern is in doubt. Substantial doubt regarding a company’s ability to continue as a going concern is prevalent to the financial statements. The auditor can be reprimanded for excluding an explanatory paragraph. The principles of ethical conduct of auditors would be compromised if the auditor is not compliant with reporting standards. The integrity and concern for the public interest would be violated. The friendship between...
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...Going Concern issues in financial reporting: a guide for companies and directors Published in 2009 by: Australian Institute of Company Directors (AICD) Level 2 255 George Street Sydney NSW 2000 Telephone: (+61 2) 8248 6600 Facsimile: (+61 2) 8248 6633 www.companydirectors.com.au publications@companydirectors.com.au Auditing and Assurance Standards Board (AUASB) Level 7 600 Bourke Street Melbourne VIC 3000 Telephone: (+61 3) 8080 7400 Facsimile: (+61 3) 8080 7450 enquiries@auasb.gov.au www.auasb.gov.au © Australian Institute of Company Directors (AICD) © Auditing and Assurance Standards Board (AUASB) © Financial Reporting Council (UK) 2009. Portions of this publication have been adapted and reproduced from an Auditing Practices Board Bulletin: Going Concern Issues During the Current Economic Conditions (December 2008) with the kind permission of the Financial Reporting Council (UK). All rights reserved. For further information please visit www.frc.org.uk or telephone +44 (0)20 7492 2300. © Portions of this publication have been adapted and reproduced from a KPMG Flash Report: How Concerned Should Directors be with Going Concern? (February 2009) with the kind permission of KPMG. All rights reserved. Typeset by Endnote design Printed by Ligare Pty Ltd National Library of Australia Cataloguing-in-Publication entry Going Concern issues in financial reporting: a guide for companies and directors/AICD, AUASB ISBN 9781876604158 (pbk.). 9781876604172...
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...INTEGRATED CASE STUDY Case 12.4: Surfer Dude Duds, Inc.: Considering the Going-Concern Assumption* *This case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. The case was inspired by discussions with Craig Isom, a former audit partner, and we gratefully acknowledge his contribution to its development. Surfer Dude Duds is a fictitious company. All characters and names represented are fictitious; any similarity to existing companies or persons is purely coincidental. Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt Learning Objectives After completing and discussing this case, you should be able to * Understand the difficulty of assessing the client’s going-concern assumption * Describe the “self-fulfilling prophecy” aspect of a going-concern modified auditor’s report * Identify factors that encourage objective auditor judgments despite the presence of friendly client-auditor relationships Background Mark glanced up at the clock on his office wall. It read 2:30 P.M. He had scheduled a 3:00 P.M. meeting with George “Hang-ten” Baldwin, chief executive officer of Surfer Dude Duds, Inc. Surfer Dude specialized in selling clothing and accessories popularized by the California “surfer” culture. Mark had served as audit partner on the Surfer Dude Duds audit for the past...
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...Chapter 1 Professional Ethics & Conduct * Non-auditor services. Pg 654 * Whether auditor can prepare financial statement for the bank? 1. Listed (Cannot) 2. Not Listed (Can) Section 201 of SOX -Provided of some safeguards -Not involved in decision making * Gift & Hospitality pg 644 * Amount is insignificant X Amount is significant * Fees & Pricing pg 651 * Effect the quality of the job * Low pricing “ low bolling” * If you’re the auditor of B, you notice there is a mistake, you told them to change but they refuse. You resign. They appoint another auditor. Can you review the successor? * Can review if you ask permission from client * If without the consent from the client, you can’t review ( breach of confidentiality) * You’re auditor for A. B is the supplier for A. In the same time, B prepare financial statement, found that A haven’t pay the money, B ask you to investigate why A haven’t pay? Can you as the auditor for A reveal the information? * You can’t reveal * Issue of confidentiality; issue of interest pg 643 * You can’t help B because you’re the auditor for A. * Concept True & Fair pg 21 * Is there a meaning of True & Fair? * Yes. It is a legal term as mentioned in Companies Act 1965. There is no proper definition on true and fair. * It is not correct or error ( guarantee or giving absolute assurance) * It is only give reasonable assurance...
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...Audit 8 Subsequent Discovery of Facts existing at the date of auditors report Auditor’s Report This report addresses the auditor's responsibilities relating to subsequent events and subsequently discovered facts in an audit of financial statements. It also addresses a predecessor auditor's responsibilities for subsequent events and subsequently discovered facts when reissuing the auditor's report on previously issued financial statements that are to be presented on a comparative basis with audited financial statements of a subsequent period. In addition this report also incorporates management representation and consideration of an entity’s ability to continue as a going concern. There may be times when new information may come to an auditor's attention subsequent to the date of their report of an audited financial statements, this might affect the previously issued report. With information form the PCAOB this report describes how a subsequent audits should be followed by any auditor who becomes aware that facts may have existed at that time of the original audit of the financial statement. When performing an integrated audit of financial statements and internal control over financial reporting, refer to paragraph 98 of PCAOB Auditing Standard No. 5, which relays that an audit of internal control over financial reporting should be integrated with an audit of financial statements, this will provide directions, with respect to the subsequent discovery of information existing...
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...objectives of the auditor are: | |To obtain appropriate audit evidence regarding the appropriateness of management's use of the going concern assumption in the preparation of the | |financial statements; | |To conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt | |on the entity's ability to continue as a going concern; and | |To determine the implications for the auditor's report | PART I – Identification of Events and Conditions |No. |Audit procedure |Comment and/or Ref. | |1. |Does management’s assessment of the entity’s ability to |N/A | | |continue as a going concern cover a period not less than | | | |twelve months from the date of the...
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...b | 18-12 | a | | 18-18 | b | 18-13 | a | | 18-19 | b | 18-14 | a | | 18-20 | c | 18-15 | a | | 18-21 | c | 18-22 a. The auditor would issue an unqualified audit report with modified wording for the reliance on the other auditors. In this case, the principal auditor does not intend to take responsibility for the other auditor's work. b. The auditor should issue a qualified audit report because management has not complied with GAAP. The auditor is not required to prepare the statement of cash flows for disclosure in the audit report. c. This approach is not in accordance with GAAP because such contingencies must be disclosed in the notes to the financial statements if the amount of the contingency cannot be reasonably estimated. A departure from GAAP such as this one requires either a qualified or an adverse opinion, depending on the materiality of the item in question. In this case the potential settlement is likely to be very large given the proportions of the tragedy in terms of human loss and suffering. In addition, the tragedy may well threaten the company’s ability to be involved in similar projects in the future and perhaps its own survival. Thus, an adverse opinion is very likely the most appropriate response. d. Because the client wouldn’t...
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