Worksheet for You Decide
Name: Course Code Acct555 Grade ___/ Date: February 13, 2013
Questions:
Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
Solution:
The SEC does have substantial influence on the audit of the company, by the auditing firm Keller CPAs. The influence can be observed in the audit standards that have to be followed in establishing the independence of auditors involved in the audit of the Company.
Independence is one of the six ethical principles of the AICPA Code of Professional Conduct.
Audit team members are required to be objective and independent with regards to the audit by maintaining objectivity and being free of conflicts of interest in discharging professional …show more content…
Some internal control issues that were recognized in the audit of Smackey Dog Food Inc.. 1. Giving commissions to the sale people based on estimated sales. This internal control issue presents risks to the company’s financial resources as the sale people might and have been paid for sales not made, there is no refund policy in place for the associates that get their commissions paid in advance. 2. There needs to be segregation of duties as respects to the handling of inventory. There is a single person appointed with the preparation and approving all of the inventory records, there is a risk that material misstatements are high. 3. There is little or no control of how returned dog foods are processed. There are associates that are taking returned dog food home with them. There needs to be some guidelines and procedures in place to stop this from …show more content…
There is little control of procedures and guidelines in the handling and recording of accounts receivable. Since on of the company’s clients is suffering financial difficulty this is very important. The receivables are 29% of total assets, the procedure and guidelines need to be fix and updated quickly since this is a large percentage of accounts receivables.
Q5: You decide that you will address Smackey Dog Food, Inc.’s accounts receivables through confirmations. Discuss the various types of confirmations and what forms you will implement and why. Solution: There are two accounts receivable conformation. The first one is positive and the second one is negative conformations. Positive conformation are conformations that ask debtors to confirm directly to the auditors whether the balance of the accounts receivables is correct or not. A negative confirmation requests debtors to respond only when they disagree with the stated amount in the confirmation form. The audit of Smackey Dog Food, Inc.’s accounts receivables, I will implement an invoice confirmation form under the positive confirmation. Q6: What are the major factors affecting sample size for confirming accounts receivable?
Name: Course Code Acct555 Grade ___/ Date: February 13, 2013
Questions:
Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
Solution:
The SEC does have substantial influence on the audit of the company, by the auditing firm Keller CPAs. The influence can be observed in the audit standards that have to be followed in establishing the independence of auditors involved in the audit of the Company.
Independence is one of the six ethical principles of the AICPA Code of Professional Conduct.
Audit team members are required to be objective and independent with regards to the audit by maintaining objectivity and being free of conflicts of interest in discharging professional …show more content…
Some internal control issues that were recognized in the audit of Smackey Dog Food Inc.. 1. Giving commissions to the sale people based on estimated sales. This internal control issue presents risks to the company’s financial resources as the sale people might and have been paid for sales not made, there is no refund policy in place for the associates that get their commissions paid in advance. 2. There needs to be segregation of duties as respects to the handling of inventory. There is a single person appointed with the preparation and approving all of the inventory records, there is a risk that material misstatements are high. 3. There is little or no control of how returned dog foods are processed. There are associates that are taking returned dog food home with them. There needs to be some guidelines and procedures in place to stop this from …show more content…
There is little control of procedures and guidelines in the handling and recording of accounts receivable. Since on of the company’s clients is suffering financial difficulty this is very important. The receivables are 29% of total assets, the procedure and guidelines need to be fix and updated quickly since this is a large percentage of accounts receivables.
Q5: You decide that you will address Smackey Dog Food, Inc.’s accounts receivables through confirmations. Discuss the various types of confirmations and what forms you will implement and why. Solution: There are two accounts receivable conformation. The first one is positive and the second one is negative conformations. Positive conformation are conformations that ask debtors to confirm directly to the auditors whether the balance of the accounts receivables is correct or not. A negative confirmation requests debtors to respond only when they disagree with the stated amount in the confirmation form. The audit of Smackey Dog Food, Inc.’s accounts receivables, I will implement an invoice confirmation form under the positive confirmation. Q6: What are the major factors affecting sample size for confirming accounts receivable?