...1.) | 1987 | 1986 | 1985 | 1984 | Current Ratio | 2.41 | 1.40 | 1.56 | .93 | Quick Ratio | 1.40 | .60 | .77 | .15 | Debt to Assets | .68 | .66 | .64 | .83 | Debt to Equity | 2.16 | 1.98 | 1.75 | 4.88 | Accounts Receivable Turnover | 32.5 | 116.78 | 49.75 | 52.72 | Inventory Turnover | 3.23 | 4.38 | 5.14 | 5.88 | Shown above are some of the key ratios for Crazy Eddie during the period 1984-1987. Some of the red flags these ratios reveal include the steady decline of inventory turnover rates from 1984-1987 which could indicate lost sales, excess inventory, or ineffective buying. Another red flag is the accounts receivable turnover figures. The drop from 116.78 in 1986 to 32.5 in 1987 is most likely a result of the poor credit policies Crazy Eddie had in place for its customers. 2.) Several audit procedures could have led to the detection of some of the accounting irregularities involved in the financial statements of Crazy Eddie. For (a) the falsification of inventory count sheets, the auditors could have visited more than one site of a Crazy Eddie store and performed full physical counts of inventory that didn’t allow Eddie Antar to stock up one location with inventory which he knew would be audited. Also, the auditors could have checked the inventory that was in place with the amounts on the inventory sheets and obtain proper documentation from vendors and confirming with them the proper inventory that was ordered. With regards to (b) the bogus debit memos...
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...Financial Statement Audit 8. Financial Statement Audit 3. Compliance 9. Financial Statement Audit 4. compliance 10. Compliance 5. Operational 11. Operational 6. Financial Statement Audit 12. Compliance CHAPTER 2 MC 2-15 A) 2 B) 1 2-16 A) 3 B) 2 C) 1 2-17 A) 2 B) 2 C) 3 Simulation Questions 2-19 A) engagement performance F) leadership responsibilities B) monitoring G) Monitoring C) Engagement Performance H) acceptance & continuation of clients D) Leadership Responsibilities I) Leadership Responsibilities E) Relevant and ethical requirements J) Human Resources 2-22 A) U.S. generally accepted auditing standards B) International Auditing Standards C) PCAOB D) PCAOB E) U.S. generally accepted auditing standards F) U.S. generally accepted auditing standards G) PCAOB H)...
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...Audit procedures which an auditor should perform when planning attendance at a Company stock take. 1.Review and planning: The auditor must review prior year’s working papers to enable himself to familiarize with the nature volume and location of inventories. Consideration must be made with regard to the controlling and recording procedures over inventory and the timing of the count. 2.Problem identification and reliance: The must identify problem areas in relation to the system of internal control and decide whether reliance can be placed on internal auditors. This also assists in risk assessment and timing audit procedures. 3.Risk and materiality: Assessment of inherent, control and detection risks is necessary for a comprehensive stocktaking audit programme and this will assist the auditor to establish materiality levels before undertaking the stock count. 4.Inventory held by third parties: Arrangement must be made to ensures that third party holding inventories confirms .Depending on materiality of the inventory held the auditor should also consider the integrity and independence of the third party and whether it is necessary to arrange for other auditors to observe the count or whether it is sufficient to obtain another auditor’s report on the adequacy of the third party’s systems or merely to inspect relevant documentation held at client place. 5.Expert assistance: Assessment must be made by the auditor regarding the nature of the...
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...Audit Term: Fall 2013 COURSE: AP/ADMS 4552 3.0 Sections A and B Information Systems Audit Schedule First day of class: Section A: Wednesday, September 11, 2013 11:30 AM – 2:30 PM, Location: HNE 030 Section B: Thursday, September 12, 2013 7:00 PM – 10:00 PM, Location: HNE 032 REQUIRED COURSE TEXT/READINGS: • Hall, James A., (2011), Information Technology Auditing, 3e, Mason: South-Western Cengage Learning (Referred to as “IT Audit Text” in the Readings List for each class) • Additional material as listed in the course outline. This includes articles referenced by links, readings from books that were required for prerequisite courses, cases and assignment details posted on our web site. • CICA Assurance Handbook, as available online from York University library, (referred to as “Handbook” in the Readings List for each class). Selected readings are from: [Note this book is available on reserve at the business library in the Schulich building if you do not have a copy.] • Arens, A., R. J. Elder, M. S. Beasley and I. B. Splettstoesser-Hogeterp. 2011. Auditing: The Art and Science of Assurance Engagements, Canadian 11th Edition, Pearson Prentice Hall: Toronto. (Referred to as “Audit Text” in the Readings List) References for the 12th Canadian edition of the Audit text (as an alternative to the 11th edition) will be provided separately as a document on the course web site. Warnings: Photocopying more than 10% of a textbook...
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...Adelphia Communications Corporation was a cable company, whose owners, John Rigas and his son Timothy,” were charged with bank fraud, securities fraud, and conspiracy.” (Reference #4) They were charged with all fifteen accounts of securities fraud. Another son of his was acquitted, as well as the former treasurer, Michael Mulcahey. “John and Timothy now face 30 years in prison because of the bank fraud charge.” (Reference #4) “They were charged with hiding over $2.3 billion dollars’ worth of debt in the company,” (Reference #4) as well as stealing from there investors. John became so greedy with the money he was taking, that his son became worried about it and tried to limit him to only taking out one million a month. The prosecution had two witnesses that they used in order to bring down the Rigas’, and they were Adelphia executives, James Brown and Karen Crosniak. They testified and tried to say that they weren’t aware of what they were doing, but ignorance of the law doesn’t mean you can get away with what you do. The effects of what they did have impacted the company so much that they had to move to a new location, and they operate under bankruptcy protection. There are many ethical issues that pertain to this issue, as well as many laws that were broken. First, what some call “creative accounting”, this is when a company tries to do something with their accounting reports to make the company look very profitable so that they can attract new investors. This is...
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...The city of Louisville-Jefferson County Metro Government, Kentucky’s fiscal year ended June 30, 2008. This is the sixth annual report issued for the consolidated government since the merger of the City of Louisville and Jefferson County governments on January 6, 2003. An elected Mayor governs the Metro Government and the Metro Council composed of twenty-six council members elected from each of the twenty-six council districts. All executive and administrative power of the consolidated local government is vested in the office of Mayor. Metro Government provides some of the following services: public protection and safety, streets and roads, planning and zoning, public improvements and community development, sanitation, public health and social services, parks, and other administrative services. The local government has achieved a prestigious award for four consecutive years; the Certificate of Achievement is awarded to government that publish an easily readable efficient organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement is valid for one year only. The 2008 CAFR reflects that Metro Government continues to be financially strong and stable in a local economy. Metro Government is required to undergo annual single audit in conformity with the provision of the single Audit Act of 1984 and the Single Audit Act Amendments of 1996 and the US office of Management and Budget Circular A-133...
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...EXAM COVER SHEET NOTE: This exam paper may be RETAINED by the student EXAMINATION DETAILS Course Code: Course Description: Date of exam: ACCT1111 Auditing and Assurance Services 28/10/2008 Start time of exam: 9:15 AM Duration of exam: 3hr 15min Total number of pages (incl. this cover sheet) 8 ALLOWABLE MATERIALS AND INSTRUCTIONS TO CANDIDATES 1. Write your full name and student number on each examination booklet together with the number of examination books used. Students must not write during reading time. 2. This is a CLOSED BOOK Exam. 3. Commence each question on a new page. Carry out the instructions on the front cover of the examination script book and the front of this exam paper. 4. Non text storing calculators are allowed. 5. Bi-lingual dictionaries are not allowed. 6. No electronic devices such as mobile phones, laptop computers, electronic dictionaries etc. are permitted to be taken into the exam room. 7. The examination paper contains the following questions: Section A ONE essay questions 25 marks Section B TWO short answer questions 15 marks Section C FIVE application questions 60 marks Totalling 100 marks 8. To obtain a pass in this course, candidates must achieve at least 50 marks overall and obtain at least 50% of the total marks on this examination paper. 9. Attempt ALL questions and all parts of questions. 10. No dictionaries are allowed in this examination unless duly authorised as a special consideration by the Course Coordinator...
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...The impact of ICT on accounting practice in Nigeria CHAPTER ONE Introduction 1.1 Background of the study In the recent past centuries, before the inception of Information and Communications Technology (ICT), the accountants of an organization were using a socially acceptable behavioural method of reporting accounting and economic reports, carried out during accounting year ends, the preparation of accounting records, book such as the profit and loss account, the balance sheet, cash book, cash flow statement, income and expenditure accounts. The application of Information and Communication Technology (ICT), on accounting practice in Nigeria has become a subject of fundamental importance and concerns to all business enterprise and indeed a prerequisite for local and international competitiveness. It is obvious that the way accountants plan and take decision on what and how to provide their service in the accounting profession has been affected immensely by Information and Communication Technology (ICT). This has continued to change the manner in which accounting practice and their corporate relationships are organized worldwide and the variety of innovative device available to improve and facilitate the speed and quality service delivery. It is obvious that the biggest impact of Information and Communication Technology (ICT) has been made on accounting; and it is the ability of companies to develop and use computerized system to...
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...Protection of outside investors relies on the detection and punishment of managers and controlling shareholders for resource diversion. In this process, auditors represent the mechanism whereby detection of diversion occurs. The critical role of auditing is to detect expropriations by insiders and to deter such behavior. Without detection, the degree of investor protection is significantly weakened. If law enforcement is not triggered, neither strictness of laws nor stringent enforcement matters; therefore, insiders have the incentive to retain auditors to provide outside investors with assurance that expropriations are limited when raising external capital (Jensen and Meckling, 1976). Some financial instruments and transactions and very complex with values that can only be estimated; that’s why in most cases, auditors may rely on the internal controls. The Internal control system plays a key role in the success of the accounting system: it protects the business from abuse and fraud, ensures that the information received is accurate and timely, and assures that all regulatory requirements are being met. The internal control system is especially critical for private fund investors. Security Exchange Commission (SEC) mandates internal controls for publically traded companies while hedge funds and other private equity funds are exempts from the regulations that other investment vehicles face. Although better internal controls should decrease the likehood of fraud and the...
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...of AICPA and SEC based on rules of independence, if pre-approved it is okay. b. Based on SOX and SEC rules internal auditing of a public company is prohibited. c. Prohibited under SOX and SEC d. AICPA rules of professional conduct, if pre-approved it is okay. e. With pre-approval it is allowed. Normally prohibited under SOX and SEC. f. According to the AICPA, this is allowed as long as the three requirements are met. 4-21 a. Violation of independence. It is not acceptable to provide management advisory services to a client you also perform bookkeeping and auditing services for. b. He does not take part in the audit. There is no violation. c. Violation of general standards d. Violation of integrity and objectivity e. Violation of Form of organization and name. f. no violation g. violation of confidentiality h. violation of acts discreditable. 4-22 a. indirect financial interest violation b. integrity and objectivity violation c. not a violation d. violation of independence e. unpaid fees violation of Rule 101 f. violation of independence g. not a violation h. violation of integrity and objectivity i. ethical dilemma and violation of Rule 203 Accounting Principles j. Violation- Contingent fees 5-17 a. (3) b. (2) c. (1) d. (2) 5-19 a. Yost and Co. should use the defenses of meeting auditing standards and contributory negligence. b. There are two defenses Yost and Co. should use in a suit by First City...
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...Micro Enhancement International, Inc. v. Coopers & Lybrand LLP 40 P. 3d 1206 (Wash. App. 2002) Facts of the Case: Micro Enhancement International (MEI) was a software development company that was on the about to have an IPO. They hired Coopers and Lybrand as the auditor. The IPO for MEI was delayed because Coopers and Lybrand were resisting some of MEI’s recognized revenue and were threating to add a “going concern” to the audit. In the end Coopers and Lybrand allowed MEI to recognize the revenue and took away the “going concern” qualification. By the time the issue was settled MEI had lost the underwriter for the IPO and then went bankrupt shortly after. MEI sued Coopers and Lybrand for multiple things, but then wanted to add a breach of fiduciary duty. MEI’s CEO Staples said that, “he trusted Coopers and that Coopers had agreed to do the audit to do the Audit and to serve as MEI’s business advisor…” The judge denied this request and MEI appealed. Procedural History: The judge denied MEI’s request to add the breach of fiduciary duty so MEI appealed. Legal Issue: The issue in this case is the establishment of Cooper and Lybrand’s fiduciary duty to MEI. If this duty is established then MEI will get to add that breach, however, if not, the judge’s original ruling will be affirmed. Reasoning/Analysis: The first thing is to understand what causes a fiduciary duty. There are two types, Matter of Law (between a attorney and client, physicians and patients, partners...
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...in all material respects and in accordance to the generally accepted auditing standards. In expressing an auditor’s opinion, they will typically issue one of four types of reports, an unqualified report, qualified report, an adverse opinion, or a disclaimer of opinion. In contrast, a qualified report indicates that the auditor has concerns about matters affecting the financial statements (this could include the client’s accounting policies or the method of their application or the adequacy of financial statement disclosure) or the limited scope of the auditor’s work. An adverse report is issued when an auditor “has concluded that the audited financial statement do not fairly represent the organization's financial position or financial performance, and that there are significant departures from GAAP” (Schmidt, 2013). A disclaimer of opinion also called disclaimer of report is issued when the auditor has not been able to obtain the sufficient audit evidence on which to base their opinion. Any of the reports issued by an auditor can bring legal consequences against the auditor and/or the firm they are employed with. Auditor’s Responsibility when Issuing a Report The objective of an Independent auditor is to render an opinion about whether the financial statements of a company, legal entity or an organization have been fairly presented in all material respects and in accordance to the generally accepted auditing standards. “These standards require him to state whether, in his opinion...
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...Government regulated monopoly GAAP General Standards 1. Adequate training and proficiency 2. Independence in mental attitude 3. Due professional care Standards of Field Work Proper Planning and supervision Understanding of the entity Sufficient appropriate evidence Standards of Reporting Statements prepared in accordance with GAAP Circumstances when GAAP not consistently followed Adequacy of disclosures Expression of opinion on financial statements *Test* Table 5.1 Definitions And broad broad stuff Can accept a gift from a client as long as its no more than “token” or the amount the firm gives you You can indirectly own stock in an auditing client if its immaterial to your net worth You cannot be paid in stock Because we don’t see the audit as one event, its not a series of events even though that looks like it. Because once you have the client you usually have it for a good amount of time. “The professional engagement period begins when the registered public accounting firm either signs an initial engagement letter (or other agreement to review or audit a client’s financial statements) or begins audit, review, or attest procedures whichever is earlier: and (B) the professional engagement period ends when the audit client or the registered public accounting firm notifies the commission that the client is no longer that firm’s audit client. You might be able to write a contract that can say the audit engagement is only a year and you might get...
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...How can the firm’s internal institution affect the corporate governance of an institution? The internal institutions of corporate governance are the shareholders, board of directors, executives and non executive and auditors. Shareholders shall monitor the status of the firm that they are in to and create rules on how it should be operated. Board of directors should be responsible for the governance of the corporation, setting policies for the accomplishment of the corporate objectives and provides independent checks on management. Executives and non-executives implement strategic plans for their organization in a cost-effective and time-efficient manner. They are also responsible for the day-to-day operation of the organization, including managing committees and staff and developing business plans in collaboration with the board for the future of the organization. They shall make reports on a regular basis – quarterly, semiannually, or annually. Auditors might affect the corporate governance of an institution by overseeing management activities in managing credit, market, liquidity operational, legal and other risk of the corporation and they shall assist the board in the performance of its oversight responsibility for the financial reporting process. How can the firm’s external institution affect the corporate governance of an institution? The external institutions of corporate governance include the government, markets, external auditors and industry. Government makes...
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...investors who take our ownership responsibilities seriously, investing significant resources and time in securing, monitoring and voting our assets. Financial reports provide vital information for us to be able to monitor executives’ use of our capital, and the audit of annual statements offers an essential assurance that information in company accounts is ‘true and fair’ (as required by the 4th and 7th Accounting Directives of the EC). The quality of the audit is, therefore, of utmost importance. We believe there are a number of worrying features of the audit market. At a very fundamental level, we are concerned about auditor independence and professional scepticism. Potential conflicts of interest have always been present in the system of auditing, so the challenge is how these are managed. We believe the current system is not delivering, as evidenced by: The failure of auditors to provide adequate warnings prior to the collapse of a number of banks and insurers in the financial crisis. In the EU alone, between September 2008 and the end of 2010, 182 banks received liquidity aid and/or debt guarantees, and 114 banks received either capital injections or asset relief aid1. None of these banks received a qualified audit report prior to the crisis. Too few large auditors providing audit services to the largest listed companies. The average market share of the Big Four audit firms in EU member states is over 90%, and in certain sectors this rises to virtually 100%2. The lack of rotation...
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