...Exercise 5.2 New-Rage Cosmetics uses ABC. The following data describe New Rage's indirect costs of producing 200 cases of Satin Sheen makeup: Quantity of Activity Activity-Cost Rate Activity Used Incoming material inspection $11.50 per type of material 12 types of material Production setup $30 per setup-hour 16 Setup-hours In-process inspection $3 per case 200 cases Product certification $24 per order 4 orders Distribution $1 per pound 2,000 pounds General administration $8 per direct manufacturing 50 direct manufacturing labor-hour labor-hours The direct costs of the 200 cases of Satin Sheen makeup total $8,200. Compute the cost per case of Satin Sheen makeup. Exercise 5.3 Four managers of Torchlight Company had dinner together. Details of their restaurant bill are as follows: Diner Entrée Dessert Drinks Total Jason $17 $8 $19 $ 44 Kent 24 3 10 37 Lynne 15 4 6 25 Marci 31 6 5...
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...would help them have a better handle on their operations. Although the company is not required to follow SEC regulations, the auditors are still required to follow the audit standards in place with the passing of Sarbanes Oxley. Audit planning is very important. The initial audit planning should be done in the early stages of the audit. The auditor must determine whether to accept the client. It is late in the year to accept new clients, and there are also some major issues with the way the company is being run, in spite of these challenges; Keller CPA’s has agreed to accept Smackey Dog as a client. The second stage in audit planning is to determine why the audit is needed. Since Smackey Dog is not publicly traded, there is no law that requires the company to get a yearly audit. This audit is needed because Smackey Dog is attempting to qualify for a bank loan. Sarah, the CEO of Smackey Dog has met with her banker to attempt to qualify for a $150,000 loan to expand the facilities and equipment. There will be no required reporting to the SEC or stockholders. The bank has already loaned Smackey Dog $150,000 so they need to know that the company is financially stable so that they will not only be able to pay back the initial loan, but they can qualify for the additional $150,000. The third stage in audit planning is to obtain an understanding of the terms of the...
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... The evidence was not relevant to the audit objective. The specific products with modifications should have been traced back to their purchase orders. Instead the auditors just took the explanation of these orders from management. Finally the reliability of the evidence was not high, USSC had a lot to lose if it was concluded that they were indeed general production and the General Manger for Lacey had changed his position numerous times. The only reliable evidence was that of the independent law firm that concluded the purchase orders and invoices were not for tooling modifications. 5 The evidence that hope collected that supports USSC's claim that the charges in question were in fact for tooling modifications was the General Manager of Lacey Corporation (A division of Barden Corporation) goes back on his previous statement and confirms that the purchase orders and invoices were in fact for tooling modifications. USSC explained their position and said that they had instructed Lacey to make certain tooling changes that would result in improved efficiency in production of USSC products. When the audit team asked to take a tour of the Lacey plant to examine the actual production process the Lacey General Manger informed the audit team that personnel often mistakenly charge tooling jobs to production. There was more evidence that supported the position that the costs in question were just generic production expenses. Initially the audit team did not notice that the assets were...
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...Strengths: –The Board of Directors meets 4 times throughout the year. –The Audit Committee is made up exclusively of external members. –In June and December, the Audit Committee holds a joint meeting with the external auditor partner, director of internal audit, and controller to be briefed on audit findings and approve the scope of planned audit activities. Also, significant changes in internal control over financial reporting are presented and explained. –The Audit Committee and compensation committee approves the recommendations of the controller regarding the annual appointment of the external auditor, and the compensation and retention of the director of internal audit .–Biltrite's internal audit staff of three members plus the director is viewed by our external audit firm as competent. The internal audit group conducts evaluations of important process on a recurring basis, usually once every ten to fourteen months. In addition the Weaknesses There is not a great deal of separation of duties for upper management and independence can be impaired. –The external members and Lawton's siblings have limited financial expertise in the bicycle industry. The Board members do not really question or challenge the upcoming budget. –Managers of Marketing and Controlling have high demands on performance targets and high financial rewards for reaching their benchmarks. Because of this, many marketing and production control managers have left the firm for opportunities elsewhere. ...
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...CONTENTS OUR BUSINESS PAGE 1 OUR SUPPLY CHAIN PAGE 14 OUR ENVIRONMENT PAGE 27 OUR PRODUCTS PAGE 37 OUR COLLEAGUES PAGE 44 OUR COMMUNITY INVESTMENTS PAGE 51 OUR BUSINESS H&M’s business concept is to offer our customers fashion and quality at the best price. At H&M, quality is more than making sure that products meet or exceed our customers’ expectations – it also means that these products should be manufactured under good working conditions and with limited impact on the environment. Taking responsibility for how our operations affect people and the environment is key for H&M’s continued profitability and growth. We are committed to integrating social and environmental concerns into all our business operations and investing in the communities where we work. Our 2008 sustainability report covers our activities in relation to our business operations, our supply chain, our products and how they are produced, our employees and the communities around us. This section provides an overview of our business and its impact, and how we go about integrating Corporate Social Responsibility (CSR) into it. GLOBAL BRAND GLOBAL IMPACT AND REACH H&M was established in Sweden in 1947 and today sells clothes, accessories, footwear and cosmetics in more than 1,700 stores in 33 countries and via internet and catalogue sales in Scandinavia, the Netherlands, Germany and Austria. Here, we will also sell home textiles through online and catalogue sales from 2009. H&M also stands behind the brand...
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...difficulties in the company’s plant in Sarnia, Ontario, the board of directors has asked the internal auditing director to evaluate production management at the plant. The internal auditing director is aware of the importance of this engagement — indeed, he considers it to be crucial for ChemiCan — and he has asked you, the senior auditor, to prepare the audit program for it. The Sarnia plant produces ethylene, an essential component in the production of polyethylene. The plant is currently facing serious problems. Until last year, the plant had always outperformed competing producers located on the U.S. side of the Gulf of Mexico. Its costs were always well controlled, and with large amounts invested, the facilities were always maintained on the cutting edge of technology. Management is very proud of its continuing education program for the engineers, technicians, and operators working at the plant. Work accidents are very rare, owing in part to a good space layout and the safety measures implemented by the management team. However, in the past year, the operating costs of the Sarnia plant have risen so much that the competitive cost advantage has completely disappeared. When asked about this, the managers say that they do not understand how competing facilities are controlling their costs better than the Sarnia plant. The assistant production manager thinks that the problems experienced at the Sarnia plant might be due to a combination of two factors. First, the introduction...
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...Chapter 1: Introduction to Managerial Accounting 1. Identify managers’ four primary responsibilities * Planning involves setting goals and objectives for the company and determining how to achieve them. * Directing means overseeing the company’s day-to-day operations. Management uses product cost reports, product sales information, and other managerial accounting reports to run daily business operations. * Controlling means evaluating the results of business operations against the plan and making adjustments to keep the company pressing towards its goals. * Making decisions: management is continually making decisions while it plans, directs, and controls operations. 2. Distinguish financial accounting from managerial accounting Managerial Accounting | Financial Accounting | Internal Users such as managers | External Users such as creditors, stockholders, and govt regulators | To help managers plan, direct and control business operations and make business decisions | To help external users make investing and lending decisions | Any internal accounting report deemed worthwhile by management | Financial Statements | Management determines what it wants in a report, and how it wants it formatted. Reports are prepared only when management believes the benefit of using the report exceeds the cost of preparing the report. | Generally accepted accounting principles (GAAP) determines the content and format of financial statements | While some...
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...rates in sales and profits to continue attracting capital from outside investors and creditors, Hirsch and his associates began using several creative accounting techniques to window dress USSC's financial statements. In 1985, the Securities and Exchange Commission (SEC), after a lengthy investigation, concluded that USSC management had deliberately and materially overstated the profits of the company for the period 1979-1982. USSC was ordered to revise and reissue its financial statements for those years, resulting in a $26 million reduction in its previously reported earnings. Additionally, Hirsch and other USSC executives were forced to repay large bonuses they had earned on the overstated profits. Ernst & Whinney, USSC's independent audit firm during the late 1970s and early 1980s, was criticized by the SEC for failing to discover the various methods used to manipulate the company's reported operating results. Among these schemes were recording shipments of product to sales employees as consummated sales transactions, improperly capitalizing litigation expenses in a patent account, and retaining the cost of retired assets in the company's financial records. The principal focus of the SEC investigation and its subsequent enforcement release for the...
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...The US Surgical Case 1) Identify audit procedures that, if employed by Ernst & Whinney during the 1981 USSC audit, might have detected the overstatement of the leased and loaned assets account that resulted from the improper accounting for asset retirements. There are various procedures that could be taken in to account that would, if properly implemented, would have detected the frauds that occurred within the companies. There are many control risks that should have been taking regarding inventory along with preliminary audit strategies for the inventory and substantive test to be done that would have raised many flags during the typical audits as well as in depth ones. First and foremost, you would need to have a clear understanding of the entity and its environment. By recognizing these particular aspects, you would be able to better judge the effects and normal fluctuations in accounts. Basic audit objectives and procedures would have raised some issues. Analytical procedures are cost effective and alerts the auditor of misstatements. For instance, if auditors would have monitored the increase profit margins coupled by the increase of inventory turn days, then you would find possible inventory overstatements that occurred. Monitoring document ad records more closely would have raised suspension as well. Control risks that should have been taken such as looking at the initiation production, the movement of goods and the recording of manufacturing and inventory...
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...grocery stores discovered the products and became distributors. The sisters moved the expanding business into a larger facility and hired a few more workers. Although their competitors’ sales were flat or declining, Smackey Dog Food Inc.’s sales were on a vertical climb! Sales were so good last year that the sisters opened a boutique division named Best Boy Gourmet, specializing in freshly manufactured, one-serving packages meant for consumption no later than 3 days after production. They sell this product at three times the cost of their other products and by special order only through their new website. Demand is high, but waste has been an issue. Sarah is the president and general manager of the operation. Sarah has been very proactive in growing the business. She has met with her banker to discuss expanding the facilities and equipment with another $150,000 loan. Their first loan for $150,000 was secured by the industrial-size food production equipment purchased with the loan. The banker now demands an audit of the corporate financial statements before releasing another loan to the company. Sarah has offered to place the corporate account receivables up as collateral to secure the second loan. Based on revenue projections by her sister Jillian’s sales team, Sarah believes that the company will not have...
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...CHAPTER 9 Production Cycle LEARNING OBJECTIVES | | | | | |Review |Exercises, Problems, and | | |Checkpoints |Simulations | | | | | |1. Describe the production cycle, including typical source |1, 2, 3, 4, 5 |41 | |documents and controls. | | | | | | | |2. Give examples of tests of controls for auditing the controls |6, 7, 8, 9 |42, 43 | |over conversion of materials and labor in a production process. | | | | | | | |3. Identify and describe considerations involved in the observation|10, 11, 12, 13, 14...
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...be ready to implement any changes accordingly . (b) The challenges in this position include conducting timely audits in all the departments to ensure the production workflow meets the actual quality standards. All the procedures and processes should be reviewed periodically and any changes identified must be properly documented and recorded. The real challenge here is the multi platform communication, coordination and the time that takes to review and complete these audits. These audits has to be conducted across various departments within the facilities including Purchasing, Finance, Warehouse,...
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...1. Describe how to perform an internal strategicmanagement audit. Discuss the Resource-Based View (RBV) in strategic management. Discuss key interrelationships among the functional areas of business. Identify the basic functions or activities that make up management, marketing, finance/accounting production/operations, research and development, and management information systems. Copyright ©2013 Pearson Education 4-2 2. 3. 4. Chapter Objectives 5. Explain how to determine and prioritize a firm’s internal strengths and weaknesses. Explain the importance of financial ratio analysis. Discuss the nature and role of management information systems in strategic management. Develop an Internal Factor Evaluation (IFE) Matrix. Explain cost/benefit analysis value chain analysis, and benchmarking as strategicmanagement tools. Copyright ©2013 Pearson Education 4-3 6. 7. 8. 9. A Comprehensive StrategicManagement Model Copyright ©2013 Pearson Education 4-4 Key Internal Forces Distinctive competencies A firm’s strengths that cannot be easily matched or imitated by competitors Building competitive advantages involves taking advantage of distinctive competencies. Copyright ©2013 Pearson Education 4-5 The Process of Performing an Internal Audit The internal audit Requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations, research and development (R&D), and management...
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...Difference between Audit Risk and Business Risk Business risks facing an organization can be wide-ranging and diverse. The ultimate business risk any organization faces is the risk that it seizes to be a going concern. Business risks therefore comprise any factors that may contribute towards business failure. Examples of business risks include: * Loss of customers * Increase in production costs * Cash flow problems * Decline in product demand * Litigations and claims * Technological obsolescence * Increase in market competition * Decrease in profitability * Political and economic instability * Over trading * Inadequate financing * High financial risk * Risk of fraud and theft Audit risk is the risk that the auditor expresses an inappropriate audit opinion on the financial statements. Audit risk therefore includes any factors that may cause a material misstatement or omission in the financial statements. Whereas business risks relate to the organization and its stakeholders, audit risk relates specifically to an auditor. Although audit risks and business risks are dissimilar in nature, it is often the case that identification of significant business risks lead to the detection of audit risks as we shall see in the following example. Example AM is the audit manager of Energy PLC, a company operating in the energy exploration and production sector. As part of the risk assessment procedures during the planning for audit of Energy...
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...focuses on five offices of an international public accounting firm that recently made large IT investments, primarily in audit software and knowledge-sharing applications. Both qualitative and quantitative information from the research site are analyzed to estimate the change in productivity following the implementation of IT. The results from both regression analysis and Data Envelopment Analysis (DEA) indicate significant productivity gains following IT implementation, documenting the value impact of IT in a public accounting firm. Keywords: public accounting; information technology (IT); IT productivity; IT adoption; data envelopment analysis. Data Availability: The confidentiality agreement with the firm that provided the data for this study precludes revealing its identity and disseminating detailed data without its written consent. I. INTRODUCTION dvances in information technology (IT) have transformed many firms in professional services industries, but perhaps none as much as those in the public accounting industry. Once a slowpaced and conservative industry, public accounting underwent tremendous changes at the turn of the millennium, sparked largely by the rapid changes in its IT environment (Elliott 2000). Audit software and knowledge-sharing applications are two crucial components of these changes. Automation of audit tasks and use of specialized audit software has...
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