Case Assignment #2 Auditing PDF

Preview

Summary

Case assignment for Professor O'Donnell class...

Description

OMITTED AUTHORS Group XX: XX:XX Section Case1: Discussion Question 2 Q:

Even though Abernethy and Chapman has no auditor within the firm that has an in-depth understanding of the consumer electronics industry they are allowed to accept the engagement without having the established necessary expertise even though it is not highly not recommended. The understanding establishes a frame of reference within which the auditor plans the audit and exercises professional judgement about assessing risk of material misstatement of the financial statements and the risks associated with the engagement. Yes, the knowledge required to audit a consumer electronics will differ significantly from that needed in the examination of a car dealership. Some examples of differences include the inventory dollar amount and size, the depreciation accounting, revenue recognition since car dealership typically deal with lease and electronics are sold individually. It would be ideal for the auditor to discuss his lack of expertise to the client and the public. The auditor however, should be able to obtain the expertise of the client without disclosing how they’re doing it.

OMITTED AUTHORS Group XX: XX:XX Section

Case1: Consulting Partner Review Question 1 (1) The reliance of Lakeside on Cypress products Q: Create a list of measures and tasks to do in order to assess Cypress likelihood of being a viable supplier for Lakeside Company Since Cypress products make up an important part of Lakeside Company’s distribution, as auditors, we should take a look at Cypress financial statements, and public documents if Cypress is public. If they’re not public, we can obtain data from market researchers on market share, sales predications of Cypress and read as much information online about Cypress as we can. We can go to Cypress’ website to gain more information that might be relevant in determining whether Cypress would continue going concern

OMITTED AUTHORS Group XX: XX:XX Section

(2) The impact of poor client operating systems on an audit engagement Q: Write a memo for our audit documentation on the impact of poor client operating systems on our audit engagement To: Audit Engagement Team From: Shiawtian Chen Date: September 27, 2015 Subject: Impact of Poor Client Operating Systems on Audit Engagement If the client has outdated operating systems then we will have to especially cautious and look out for potential mishaps due to the weak operating systems if we even decide to accept this engagement. We should approach this audit by determining the key areas where errors or misstatement are likely to occur and test each areas with greater sample size. The outdated operating systems would most likely increase the number of staff we would need and most certainly increase the cost. There is also an increase in the risk of errors or frauds that can result in us being liable in the future. Weak operating systems have tendency to provide opportunities for errors and frauds to be committed so we have to especially careful and proactive in our engagement.

OMITTED AUTHORS Group XX: XX:XX Section

(3) Testing for long-lived asset impairment Q: Make a list of procedurals on how long-lived assets are tested for impairment FASB ASC 360-10-05 1. First determine whether the long-lived assets is classified as (1) Held and Used, (2) Held for Sale, (3) To Be Disposed of Other than by Sale 2. In our case, lakeside Company plans to hold on to the property so it will be in the (1) category but next we need to determine if the long-lived asset meet the requirements of being not recoverable and exceeds its fair value (360-10-35-17) 3. Once the impairment loss is recognized, the adjusted carry amount of a long-lived asset shall be its new cost basis. We will under the new cost basis depreciate the long-lived asset over the remaining useful life. (360-10-35-20)...