...Worksheet for You Decide Name Course Code 555-10195_ Grade ___/ Date 10/20/2013 Questions: Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: The SEC (Securities and Exchange Commission) has substantial influence on the audit of Smackey Dog Food, Inc. This can be seen in the audit standards that have to be followed by the established independence of the auditors involved in the Smackey audit. In the audit of public listed companies which includes Smackey, the auditors need to observe several principles. Independence is one of the six principles exhibited by the AICPA and the others include responsibilities such as the public interest, integrity, objectivity and independence, due care, and scope and nature of services. An audit team is required to be objective and independent with regard to professional responsibilities and by being independent in fact and appearance when providing auditing and other attestation services. Under the Sarbanes – Oxley, auditors have to be objective and independent otherwise legal sanctions can be pursued and incurred. 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: The following are several essential activities involved in the initial planning of an audit and how they are specifically related to Smackey Dog Food, Inc. : 1. First understand the client’s business...
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...Worksheet for You Decide Name Cathie Reid Course Code ACC555 Grade ___/ Date_12_/12_/12_ Questions: Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: The SEC does not have direct influence over the audit of Smackey Company because, Smackey is not a public held organization, they do not have assets in excess of $10 million, and they do not have over 500 stockholders; which are the requirements for public and privately held companies. The SEC does have indirect influence over the audit because all companies, whether public or private are required to comply with General Accepted Accounting Principles (GAAP) and the SEC plays a significant role in influencing these standards. The auditors, while not bound by SEC rules they are required to obey specific audit rules and guidelines as outlined under the the American Institute of Certified Public Accountants (AICPA). The AICPA is responsible for establishing auditing and attestation standards for private companies in the United States and for enforcing a code of professional conduct for its members. The code is comprised of six principles that the auditors must adhere to. The principles are: responsibilities, the public interest, integrity, independence and objectivity, due care, and the scope and nature of services. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client...
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...Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. The Securities and Exchange Commission assists in providing investors with reliable information upon which to make investment decision. The SEC has considerable influence in setting generally accepted accounting principles and disclosure requirement for financial statements as a result of its authority for specifying reporting requirements considered necessary for fair disclosure to investors. The SEC has power to establish rules for any CPA associated with audited financial statement submitted to the commission. The SEC adopted rules strengthening auditor independence in January 2003 consistent with the requirements of the Sarbanes-Oxley Act. The SEC rules further restrict the provision of nonaudit services to audit clients, and they also include restrictions on employment of former audit firm employees by the client and provide for audit partner rotation to enhance independence. Although Smackey Dog Foods, Inc. is nonpublic companies, independence rule is applied same as public. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Initial audit planning involves four things, all of which should be done early in the audit: 1. The auditor decides whether to accept a new client or continue serving an existing one. Smackey is a new client for Keller CPA. Before they accept the audit, Keller...
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...Smackey Dog Foods, Inc Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: The SEC assists in providing investors with reliable information upon which to make investment decision. The Securities Act of 1933 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval. The Securities Exchange Act of 1934 provides additional protection by requiring public companies and others to file detailed annual reports with the commission. The SEC has considerable influence in setting generally accepted accounting principles (GAAP) and disclosure requirement for financial statements as a result of its authority for specifying reporting requirements considered necessary for fair disclosure to investors. The SEC has power to establish rules for any CPA associated with audited financial statements submitted to the commission. With Smackey Dog Food, 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 consist of the following: 1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make a important decisions. The auditor wants to make this decision early, before incurring any significant cost that cannot be recovered. With...
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...Worksheet for You Decide Name _JANICE VALDEZ Course Code _AC555ON_Grade ___/ Date 4/15/_2012_ Questions: Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: The Securities and Exchange Commission (SEC), an agency of the federal government, assists in providing investors with reliable information upon which to make investment decisions. The Securities Act of 1933 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval. The Securities Exchange Act of 1934 requires public companies and others to file detailed annual reports with the commission. SEC examines these statements for completeness and adequacy before permitting the company to sell its securities through the securities exchanges. SEC requires that financial statements be accompanied by the opinion of an independent public accountant, which is a part of a registration statement and subsequent reports. Since Smackey Dog Foods, Inc. is not a public company, there is no direct influence of SEC. However, SEC’s rules establish the guidelines of GAAP and personal conduct for Smackey Dog Foods, Inc. (Auditing and Assurances Services, 13th Edition. Pearson Learning Solutions p. 30). <vbk:9781256083337#outline(6.7)> 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: 1....
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...You Decide – Smackey Dog Foods Inc Smackey Dog Foods, Inc. is a familiar story in terms of small business start-ups. They started in a family kitchen, experienced explosive growth, and have had some troubles handling the accounting and business side of the business. My firm, Keller CPA’s, does not have specific experience with auditing a dog food manufacturer, but we certainly have a good bit of experience with similar small business accounting and auditing issues. The first thing to address is the SEC’s role or influence over Smackey Dog Foods. Since Smackey is private there is not a direct oversight or reporting role for the SEC. Indirectly, however, they help establish GAAP and have a role in how the books should be maintained, how the officers should conduct business, and how Keller CPA’s determine they can accept the engagement, ie their independence (sec.gov). My firm is sending Pete, Ben, and Maureen to visit the client, assess the situation, and plan the audit. To plan the audit they will have to begin developing the audit strategy, identifying problem areas and specific areas where material misstatement might occur. In this case I would identify the forecasted sales numbers as one area due to Jill’s less-than-ideal management methods. Also, they will need to analyze the lawsuit and the lawsuit of their biggest buyer to get a feel for the risk associated with those. The audit plan will also include the nature of the business and what it does, a dog food manufacturing...
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...Smackey Dog Foods, Inc. has been a very successful dog food manufacturer for the past few years, but along with their success, they have many issues surrounding their management styles and accounting techniques. These issues are a result of management’s inexperience and lack of knowledge of the proper controls related to running a business and the entire accounting aspect. Q1 Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. SOLUTION: Although Smackey Dog Foods, Inc. is not a publicly traded company the SEC has a significant influence on their audit. During the audit, Keller CPAs will still need to follow the auditing standards put in place by the SEC. AICPA principles will be followed, ensuring that the Keller CPAs are independent of the client and free of conflicts of interest when performing professional responsibilities. Q2 Discuss the essential activities involved in the initial planning of an audit. How do these all specifically relate to the Smackey Dog Food client? SOLUTION: 1. Understand the client’s business and industry. Keller CPAs can use its experience from auditing other manufacturing companies in the audit of Smackey Dog Foods, Inc. The essential part of this step is for the audit team to learn and understand as much as possible of the client’s business and industry. All related parties will be identified in this stage of the planning as well. 2. Assess client business risk. The business risk involved...
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...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...
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...------------------------------------------------- Smackey dog food Auditing [Date] tamucc [Company address] [Date] tamucc [Company address] Smackey Dog Food is a family owned and operated company that began as a dream of two sister’s and its meager beginnings were established in the kitchen of their home. The business has become more profitable and thus the sisters have a need to expand the business into a larger facility. There was a need to hire additional employees in order to meet the demand for the increase in Smackey Dog food orders. With the increase in sales the women decided to embark on a new product line and open a “Boutique Division that was named Best Boy Gourmet” that specialized in freshly manufactured, one-serving packages meant for consumption no later than 3 days after consumption. There is a huge demand for this product but waste is an issue. The dog food manufacturing industry requires many key figures with regards to operations of the warehouse. Depending on how large the warehouse is there are a lot of steps from the initial order from the customer until it is finally delivered to the customer. When an order is placed there is an immediate need for a lot of employees to fill an order especially if they are using an assembly line. Fork lift drivers bring the raw materials such as the fiber. The dog food depending on the type, for example if it is canned dog food or bags is placed for the employees of the assembly line to access it...
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...Smackey Dog Food Inc. has hired my firm and me, Keller CPAs, to complete an audit of their company and its financial statements. To continue being the successful company that they are, Sarah, Kim, and Jillian need to get better control of the company in its aspects of general business including inventory control and accounting. From the looks of things now, they are failing and headed in a downward spiral if they way things are happening continue. One of our jobs as an auditing company is to locate and address any issues and concerns with the audit and how we will proceed. Upon first glance at Smackey Dog Food, there are a couple of key issues and concerns that the company is currently experiencing. The first prominent issue that I see with the company is a serious lack of internal control starting from the very top. No one person seems to be in control of anything and the different areas of the business are being run as the sisters see fit which is not a good business practice. Sarah is trying to secure a bank loan using the accounts receivable as collateral and basing whether they will be able to pay down the loan by Jillian’s sales team projections. Problem there is that Jillian’s sales team is earning commissions on sales that they are not even getting because Jillian wants to be liked and costing the company about 11% average in profits. If the sales projections are off, they run the risk of not being able to pay back the loan like they assumed and the expansion that is desired...
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