...SUBJECT: (GA-5) Materiality for Apollo Shoes From analyzing the data from the financial statement of Apollo Shoes.Inc, I had found many points that was found to be skeptical of containing material misstatement of a company’s assertions. 1. Independent auditors’ concept of materiality As an independent auditor, our goal is to obtain the reasonable assurance about whether the financial statements as a whole are free of material misstatement. In consideration of the usage of the outside user of a company’s information, material misstatement may influence the user’s point of view while making decisions. In addition, materiality is a matter of professional judgement that the engagement partner must decide in each audit engagement. At the same time, most importantly, in an audit of financial statements, the auditor's judgment as to matters that are material to users of financial statements is based on consideration of the needs of users as a group. 2. Common measure of materiality Financial statement measurements and information in some footnote disclosers are not usually presented in the most accurate amounts. So, choosing an appropriate benchmark such as total net assets, profits before tax, total revenue can relate directly back to the financial statement. In addition, looking at the calculation of those key number amounts’ percentages, ratios, levels of rounding to zero could detect abnormalities or materiality when compare to the benchmarks such as industry standards, company...
Words: 610 - Pages: 3
...Inc. The new client acceptance Decision ins tr uC t ional o b je C t ive s [1] To c a s e 1.1 Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt help students understand the process of considering a new prospective audit client and the factors that auditors commonly consider in making the acceptance decision. [2] To give students experience in computing and interpreting preliminary analytical procedures commonly used in obtaining an understanding of a prospective client during the client acceptance decision process. [3] To raise issues relating to auditor independence in the context of client acceptance, both in terms of financial interests and the provision of non-audit services. To illustrate the subjective and sometimes difficult nature of the judgments involved in the client acceptance decision, and to give students the opportunity to justify a recommendation on client acceptance in the presence of both significant positive and negative factors. [5] To help students understand how information gathered in the client acceptance process can help the auditor in planning the audit if the client is accepted. [4] KEY FACTS The student takes on the role of a newly promoted audit manager recently given the task of considering factors and making a recommendation with respect to the acceptance of a new prospective client. The request to consider the engagement was received two weeks past the client’s fiscal year-end. The accounting...
Words: 4495 - Pages: 18
...1.0 Project Plan Overview 1.1 Description of the Project Remington Peckinpaw Davis leadership team, eRPD oversight committee and IT department have different ideas about what should be most important to the company while fixing problems with the software. The vested groups will work towards resolving the issues with eRPD and embarking on a marketing campaign to save the company’s reputation. 1.2 Problem/Result Statement Members of the Remington Peckinpaw Davis oversight committee do not recognize the importance of contributions from each team member within the eRPD process. The power struggle led to faulty planning for the installation of the eRPD program. RPD can fix problems with the eRPD system by developing and following a baseline for the project. 1.3. Mission Justification The project relates to the mission and goals of Remington Peckinpaw Davis by establishing detailed guidelines for the solving problems with eRPD and for use with future projects. 1.4 High-Level Scope Project Objective To fix the problems with eRPD, establish both a work breakdown structure and organizational breakdown to prevent incurring the same obstacles with future projects. Deliverables • Revamping eRPD to satisfy customers • Team building exercises to strengthen the relationship amongst the three teams • Marketing campaign designed to explain how the company has resolved the software issues. Milestones: • Team Building for Technical team and eRPD oversight committee- July...
Words: 907 - Pages: 4
...Case 9.6: Hooplah Inc. Part A: Test of Controls [1] Evaluate the appropriateness of Darrell’s conclusions relating to the first two controls: [a] Is it acceptable to use the same set of transactions and the same sample size to test two different controls? 1. a. Darrell should not resort to using the same set of transactions and same sample size to test the first two controls. Although all sales pass through both controls and the tolerable deviation rate is the same, the expected population deviation rate varies, meaning that Darrell should use a new randomly chosen set of transactions for the second control. In the first control, since it is moderately important the deviation rate is targeted at 8%. The population deviation rate is set at 1%, indicating that a sample size of 58 should be used, with an allowance for 1 deviation and still be assumed tolerable. In the second control, the tolerable deviation rate is still set a 8%, although now the population deviation rate is set at 2%, increasing the sample size up to a set of 77 transactions. In addition, there is now an allowance for 2 deviations within the set. [b] Do you agree with Darrell’s conclusions with respect to these first two controls? If not, why not? In evaluating Darrell’s conclusions, you may wish to refer to the attribute sampling evaluation table available in Appendix A. b. Darrell’s conclusions regarding the first two controls are not entirely accurate. Because he did not test using the right...
Words: 2404 - Pages: 10
...ISSUES IN ACCOUNTING EDUCATION Vol. 23, No. 2 May 2008 pp. 299–307 Assessing Audit and Business Risks at Toy Central Corporation Christine E. Earley and Fred Phillips INTRODUCTION [pic]s a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Central Corporation (TCC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TCC’s sustained profitability, so that they can be brought to the attention of the company’s board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting. COMPANY BACKGROUND Toy Central Corporation (TCC) designs, manufactures, and markets a variety of toys, which are sold primarily to large national retailers like Wal-Mart, Toys R Us, Kmart, and Target. TCC is a small company compared to competitors Mattel and Hasbro; nevertheless, TCC’s managers believe its toys are among the best in the world. Unlike the larger toy makers, which bring thousands of toys to market each year but experience success with only a fraction of them, TCC has enjoyed success with a small portfolio of brands and products, representing three categories: (1) soft toys, consisting primarily of its Cuddle Monsters stuffed animals; (2) hard toys, including metal-cast and plastic-cast toys like Fast Racers cars and Acto action...
Words: 2391 - Pages: 10
...ISSUES IN ACCOUNTING EDUCATION Vol. 23, No. 2 May 2008 pp. 299–307 Assessing Audit and Business Risks at Toy Central Corporation Christine E. Earley and Fred Phillips INTRODUCTION [pic]s a senior in a professional services firm, you have been assigned to plan the financial statement audit of a private company named Toy Central Corporation (TCC). In addition, the partner on the engagement has asked you to identify business risks that could adversely affect TCC’s sustained profitability, so that they can be brought to the attention of the company’s board of directors. These tasks will require you to draw on your knowledge of supply chain management, marketing, internal controls, audit assertions, and financial accounting. COMPANY BACKGROUND Toy Central Corporation (TCC) designs, manufactures, and markets a variety of toys, which are sold primarily to large national retailers like Wal-Mart, Toys R Us, Kmart, and Target. TCC is a small company compared to competitors Mattel and Hasbro; nevertheless, TCC’s managers believe its toys are among the best in the world. Unlike the larger toy makers, which bring thousands of toys to market each year but experience success with only a fraction of them, TCC has enjoyed success with a small portfolio of brands and products, representing three categories: (1) soft toys, consisting primarily of its Cuddle Monsters stuffed animals; (2) hard toys, including metal-cast and plastic-cast toys like Fast Racers cars and Acto action...
Words: 2391 - Pages: 10
...Advanced External Auditing [AU2] Examination Blueprint 2013/2014 Purpose The Advanced External Auditing [AU2] examination has been constructed using an examination blueprint. The blueprint, also referred to as the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the topics, the level of competence for each topic, and the related learning objectives and competencies. The learning objectives have been designed to ensure that the competencies are met. In addition, information is provided on the proportion of each question type presented in the examination (that is, multiple choice, quantitative problems, and so on). Use Candidates should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course materials; however, candidates are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be tested in assignment and review questions. The topics not listed in the blueprint will also provide candidates with a greater depth of understanding of auditing concepts. Examination Objectives The objective of the 4-hour comprehensive examination is to test CGA candidates on the prerequisite knowledge required for advancement into PA1 and PA2, so as to ensure that the candidates have the broad-based knowledge in assurance needed to function properly in the association’s...
Words: 7165 - Pages: 29
...Audit Process Letter Laura Sferra ACC/546 November 23, 2015 Allen Foster Mrs. Susan Right Senior Partner Anderson, Olds, and Watershed 1 Shoe Street New York, NY. 90001 Dear Mrs. Right, Mr. Lancaster, President of Apollo Shoes, has expressed his satisfaction with the services that our firm offers and would like to continue with a full audit. Because our client does not want our firm to talk to the predecessor auditor, I recommend accepting a prospective engagement after I perform an investigation by gathering information about our client's reputation and background. Client acceptance and continuance procedures are the foundation of the risk assessment process (SAS No. 8). Upon acceptance of our client, I am confident that we will be able to move forward under the AICPA auditing standards to determine that the financial reporting framework is appropriate. My objective is to plan the audit so that it is conducted efficiently and effectively, in accordance with Generally Accepted Auditing Standards. I will take into consideration the preliminary planning activities such as the client acceptance, ethical position of our audit firm and our understanding of the entity and its environment, including its internal control, to develop an effective and efficient overall audit strategy that will appropriately respond to assessed risks. Our engagement letter, will include the timetable of fieldwork, the scope and duration of...
Words: 1378 - Pages: 6
...Audit Evidence of Grande Store Case Nancy Johnson Rasmussen College Author Note This paper is being submitted on January 23, 2015, for Gary Rosner, A340 Advanced Auditing Concepts and Standards course. Audit Evidence of Grande Store Case When it came to the audit of the Grande Store there was insufficient numbers (four out of 1,100) to be an exact for the confirmations that were made regarding what was spent by McClure Advertising Credits. With 114 pages, 1,100 vendors and $300,000 at least 1% should have been audited for each vendor. Getting information to confirm by an outsider who has the qualifications is reliable and acceptable but it should be in written form. The auditors of Grande Store used the phone. This alternative procedure might be acceptable but it should never be used. The auditors felt the differences in the audit were immaterial, but the auditors should have went further and found out the reason for these differences. If the auditors had kept track of the differences they might have found that there were many errors this causing them to find the reason why there were so many differences (Arens, Elder, & Beasley, 2012, pp. 175-206). When it came to testing the ad’s the auditors should never rely on just internal documentation. By trusting the internal documentation they did not have sufficient enough evidence to support the credits. Placing an ad is not sufficient enough evidences without quality supporting evidences from the vendor that it...
Words: 1003 - Pages: 5
...Advanced External Auditing [AU2] Examination Blueprint 2013/2014 Purpose The Advanced External Auditing [AU2] examination has been constructed using an examination blueprint. The blueprint, also referred to as the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the topics, the level of competence for each topic, and the related learning objectives and competencies. The learning objectives have been designed to ensure that the competencies are met. In addition, information is provided on the proportion of each question type presented in the examination (that is, multiple choice, quantitative problems, and so on). Use Candidates should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course materials; however, candidates are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be tested in assignment and review questions. The topics not listed in the blueprint will also provide candidates with a greater depth of understanding of auditing concepts. Examination Objectives The objective of the 4-hour comprehensive examination is to test CGA candidates on the prerequisite knowledge required for advancement into PA1 and PA2, so as to ensure that the candidates have the broad-based knowledge in assurance needed to function properly in the association’s...
Words: 7165 - Pages: 29
...Case 04-1 Total Computer, Inc. Tim Jacobs (Audit Manager) was reviewing the working papers for Total Computer, Inc., a large, privately owned retailer of computer hardware in the United States. Tim is on site at the client’s headquarters and has only two sections to review: inventory reserves and accounts receivable. Inventory Reserves While reviewing the inventory working papers of Total Computer, Inc., Tim focused on the lower of cost or market (“LOCOM”) inventory reserve, which had been identified as an area of audit risk. The working papers included a schedule prepared by the client showing beginning and ending balances, write-offs, and the current-year provision. Sarah Byrd (Audit Staff) summed the schedule and traced the ending LOCOM reserve balance into the general ledger without exception. Further, Sarah documented in a memo that she held discussions with Betty Bingham (Controller) to gain an understanding of the client’s assumptions and judgments regarding the calculation of LOCOM inventory reserves. Betty prepared the LOCOM reserve based on her extensive knowledge of the company and the computer hardware business, as well as, her discussions with Jerry Lee (Director of Marketing). Sarah’s memo documented the following: • Inventory is a diverse portfolio of computer hardware produced by several manufacturers. • Total Computer, Inc., consistently has experienced an average inventory turnover of 10 times per year. • Based on his knowledge of the marketplace, Jerry identified...
Words: 995 - Pages: 4
...neither assistance or suggestions to anyone else nor received assistance or suggestions from anyone else in the process of completing this case. Pledge (handwritten signature in pencil):__________________________________ Date (handwritten in pencil):_____________________ Answer the following questions ONLY: Question [1]: Review Exhibits 1 and 2; audit memos G-3 and G-4; and audit schedules G-5, G-6 and G-7. Based on your review, answer each of the following questions: [a] Why are different materiality bases considered when determining planning materiality? [b] Why are different materiality thresholds relevant for different audit engagements? [c] Why is the materiality base that results in the smallest threshold generally used for planning purposes? [e] Why may the auditor use a different performance materiality amount or percentage of account balance for some financial statement accounts? Question [2]: Based on your review of the Exhibits (1 and 2), audit memos (G 3 and G 4), complete audit schedules G-5, G-6, and G-7. Be sure to attach these three completed audit schedules to these solutions. Answer [1]: [a] Why are different materiality bases considered when determining planning materiality? Financial statements are...
Words: 716 - Pages: 3
...objective of financial reporting is to assist a government entity in fulfilling its obligation to be publicly accountable and to enable users to assess accountability (GASB 2007; Government Accountability Office [GAO] 2007). Budgeting, a process whereby government administrators forecast expected revenues and identify planned expenditures, is an integral part of accountability, and the extent to which a governmental entity adheres to its budget is a major consideration when assessing accountability. In August 2005, Violet Bay1 taxpayers were informed that their school system had run a $7 million deficit after several previous assurances that the system was fiscally sound and would finish the year with a surplus. By November 2005, an external audit determined that the actual deficit was $12.1 million. Three months later, a special grand jury report was released describing the causes of the financial crisis and addressing the means to correct the situation. What went wrong? Place yourself in the role of an auditor or a consultant and identify the problems. As you do so, you will better appreciate the importance of internal control and will gain experience in identifying and assessing client risks. While this case involves a governmental entity—a school district—no prior coursework in governmental accounting is required to complete case requirements. PART I – THE BUDGET PROCESS The Violet Bay School District (hereinafter, the “VBSD” or the “School”) provides public primary and secondary...
Words: 5312 - Pages: 22
...Audit Planning Memo To: Peach Blossom Cologne From: Anderson, Olds, and Watershed Date: December 28, 2010 RE: Audit Plan Our audit team, Anderson, Olds, and Watershed, will be auditing the financial statements for the year ended December 31, 2010. We will begin on January 11, 2011 and end February 5, 2011. The audit will follow a tentative time budget (reference P-1 Time Budget). Our objective is to correctly attest, following AICPA rules, as to whether the company Peach Blossom Cologne has issued financial statements that are fair by GAAP. The team has identified various risk factors involved in this audit engagement. As evidenced by our Internal Control Questionnaire, PBC has failed to prepare an organization chart, which would ensure that the employees are aware of their restricted duties and responsibilities to the company. We have also identified that management does not require personnel who have financial responsibilities to take annual vacations, which increases risks that frauds and/or errors may not be caught in the absence of the employee. Also, output devices such as printers are not located in a secure area and LAN reports are left unlocked. Upon further consideration of internal controls, we have noticed a few weaknesses regarding the handling of mail and separation of duties. All of these internal control deficiencies will be considered in the audit of PBC’s financial statements. Our team’s initial horizontal, vertical and ratio analyses have raised a few...
Words: 328 - Pages: 2
...CPA Program The practical experience guide and logbook If you require further information about the practical experience requirement, or would like to notify us of a change, please contact CPA Australia: practicalexperience@cpaaustralia.com.au or contact your local office – details can be found on the inside back page of this guide. Disclaimer The material used in this booklet has been designed and prepared for CPA Australia’s practical experience requirement. It provides tailored guidance for mentors who are registered in CPA Australia’s practical experience requirement. The booklet and contents should not be used for any other purpose. CPA Australia, the publisher and the author of this booklet take no responsibility for any loss incurred by any person who relies on guidance offered in this booklet. Legal notice Copyright CPA Australia Ltd (ABN 64 008 392 452) (“CPA Australia”), 2010. All rights reserved. Save and except for third party content, all content in these materials is owned by or licensed to CPA Australia. All trade marks, service marks and trade names are proprietory to CPA Australia. For permission to reproduce any material, a request in writing is to be made to the Legal Business Unit, CPA Australia Ltd, 385 Bourke Street, Melbourne, Victoria 3000. CPA Australia has used reasonable care and skill in compiling the content of this material. However, CPA Australia and the editors make no warranty as to the accuracy or completeness of any information in these...
Words: 15775 - Pages: 64