Assignment 1 - Discussion Questions PDF

Preview

Summary

assignment 1...

Description

Integrated Audit Practice Case SEVENTH EDITION

Assignment ONE Discussion Questions

David S. Kerr l Randal J. Elder l Alvin A. Arens

Armond Dalton Publishers, Inc. Okemos, Michigan

NAME:

Discussion questions Charles Ward, the engagement partner, has already completed the Client Acceptance Form in the permanent file. Based on the information you studied in the Permanent File and the unaudited financial statements included in the current workpapers (workpapers 1-1 through 1-5), evaluate the client acceptance decision. Organize your answer using the two-column format shown below.

1.

a. Indicate two favorable factors most important to the client acceptance decision (one factor has been provided as an example). b. Indicate three concerns you have about accepting Oceanview as a client. Factors Favoring Acceptance 1.

2.

Responses to inquiries of predecessor auditor were complimentary about Oceanview. Predecessor auditor spoke highly of Oceanview’s employees’ integrity, competence, and dedication to running a successful business.

Concerns about Acceptance 1.

2.

2.

3.

3.

Indicate whether you agree with the decision to accept the client. Justify your decision, indicating the one or two factors from your response to the first question that had the greatest influence on your decision.

Page 1 l Assignment ONE

NAME:

3.

The client and our firm have agreed on an initial estimated audit fee of $32,000 (see the engagement letter). However, the estimated total cost of performing this year’s audit is $37,590 (see the fee budget on workpaper 6-5). Discuss possible reasons why a CPA firm might charge a new client an audit fee that is lower than the estimated first-year costs of performing the audit.

4.

Auditing standards require auditors who are considering accepting an audit engagement to communicate with the previous auditors. a. What is the primary purpose of this communication between the new (successor) and old (predecessor) auditors?

b. Why is the client’s permission required before this communication can take place?

c. The successor auditor also often reviews the predecessor auditor’s workpapers. What is the primary purpose of reviewing these workpapers?

Page 2 l Assignment ONE...