Worksheet for You Decide

Questions:

Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
Solution:

Since Smackey Dog Foods, Inc (“Smackey”) is not a publicly traded company, it would not be subject to SEC regulations and therefore would not need to file the required reports under the securities acts. It would however have indirect impact on the audit of Smackey due to the SEC’s influence in setting generally accepted accounting principles (“GAAP”), the required disclosures for financial statements and any major changes proposed by the Financial Accounting Standards Board (“FASB”).

Nonetheless, during the audit of Smackey, Keller CPA is subject the six generally accepted auditing standards established by the Auditing Standards Board (“ASB”) under the Accounting Institute of Certified Public Accountants (“AICPA”) which includes the ten standards of auditing.

Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?
Solution:

Audit planning includes eight major parts, of which the first seven are intended to help Keller CPA to establish the eighth, which is to develop an overall audit plan and audit program. They are as follows;

Acceptance of the client and perform initial audit planning – Keller has already agreed to accept this client, although they should still try to assess Smackey with regards to other audit client of theirs. They should go through the usual client acceptance procedure which Keller CPA has in place and the decision to take on the audit should have been made before any substantial costs have been incurred. This decision should not be taken lightly and Keller CPA should ensure that they feel the client is appropriate to take on. The initial planning procedures that Keller CPA will go through included