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Keystone Computer Case

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Submitted By Nikki789
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PART 1: AUDIT PLANNING
Appendix 6C Problems
6C/1. The audit plan for Keystone Computers & Networks, Inc. Section | Purpose | Content | Objectives of the Engagement | To describe the services that are to be rendered to the client | The objectives are (1) audit of KCN’s financial statements for the year ended 12/31/05, and (2) issuance of a letter on compliance with covenants of the client’s letter of credit agreement. | Business and Industry Conditions | To describe the nature of KCN’s business and industry. | KCN sells and services microcomputers, networking hardware and software to business customers. KCN is exposed to external shocks and competitive forces in its industry. To effectively compete and succeed, KCN must have qualified personnel. Management must increase its activities by 3% annually for next 3 years to achieve its goals. | Planning Meetings | To indicate meetings held with client and Audit Team | So far 2 meetings: 1) meeting with client and 1) Audit team | Ownership and Management | To determine the owners and management of the company | Private owners: John, Terry, and Mark Keystone; Keith and Rita Young.Terry and Mark Keystone are a part of the board of directors. | Objectives, Strategies and Business Risks | To describe KCN’s business objectives, major strategies and the risks related to achieving its objectives | Major Objective: Increase revenues by 6% & Net income by 8% annually for next 3 years.Major Strategies: New software development, aggressive advertising, and sales to high risk customersMajor Risk: inability to compete for qualified employees to produce software products; ineffective advertising;disproportionate increase in uncollectable receivables due to target market with higher risk | Measurement and Review of Financial Performance | To understand methods used by management to monitor performance |

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