According to information we’ve obtained from understanding of company background and during audit field work we identified some issue and company control risk related to the follow areas:…
When all data is gathered we will complete a risk assessment of the company so that the best audit approach may be…
If an auditor believes the chance of financial failure is high and there is a corresponding increase in business risk for the auditor, acceptable audit risk would likely:…
The first stage that specifically applies to the audit of Smackey Dog Foods, Inc. is the planning and risk assessment stage. For Smackey, the risks can initially be assessed by obtaining understanding of Smackey’s business and its industry. More specifically, the design and implementation of the client’s internal control procedures, processes and systems are studied and analyzed for the audit team to be able to assess the control risk for each of the transaction-related audit objectives- occurrence, completeness, accuracy, classification, timing and posting and…
In 2008, Haverwood Furniture and Lea-Meadows Inc. merged into one company. The issue at hand involves merging the selling efforts of the two companies. They both go about selling their products differently and the best plan of action is uncertain. John Bott, of Haverwood, believes that Haverwood sales representatives implement the best selling strategy whereas Martin Moorman, the national sales manager at Lea-Meadows believes that they have the superior strategy.…
After performing preliminary analytical procedures and planning activities for Pinnacle Manufacturing, I have found several factors influencing inherent risks and acceptable audit risk. I have categorized the determinants of acceptable audit risk into three different factors: external users’ reliance on financial statements, likelihood of financial difficulties, and management integrity. All the calculations in detail are listed at the end of this report.…
Identify any sources of risk or uncertainty in its operations. Do the financial reports indicate risky or uncertain activities or changes to the economic environment that ultimately appear to have affected the company’s financial outcomes? Be specific.…
b. Acceptable audit risk is medium to low because of the factors listed in part (a) and the planned increase in financing and the potential violation of the debt covenant agreement. This might be low because this is the first year audit.…
Read the auditor’s report included in the annual report of the company and explain its purpose. Identify the name of the auditing firm.…
When an auditing firm’s clients are large, high-risk clients for relatively high audit fees, there is a risk that independence will be compromised if it has the potential to end the relationship with a profitable high-risk client. Add to this, the client having a high audit risk, and it has the potential to make the audit…
Client's business is with the risk of the entity not being profitable and not continuing to survive. There could be going-concern issues, inflated profit goals, or operations in volatile industries that can impact an entity's risk (Colbert, 1996). Most business risks will eventually have financial consequences and, therefore, an effect on the financial statements. Financial trends commonly represent the most important part of client's business risk. Audit firms cannot control the amount of client's business risk. They can only assess it and decide whether or not to accept the risk.…
5. Review the audit report issued by the external auditing firm from the company’s Website for the year it was accused of fraud. Then, determine whether the external auditors were negligent in preparing the audit report for the company. Formulate an opinion regarding which Internal Control was deficient or what GAAP was violated. Defend your position.…
During an audit it is the auditors responsibility to give their opinion on a company’s financial statements to its shareholders. However, the main purpose of the audit is to provide useful and reliable financial statements to investors and creditors. So when the auditor is assessing the audit risk they are assessing the risk on behalf of the investor/creditor according to their interest. The auditors respobsibility is directly to the client when it comes to the engagement and not to the third party in which the client intends to distribute the financial statements to. In the end the auditor only has legal liability towards the client and it would be difficult for an auditor to meet the objectives of all parties involved.…
The acceptable audit risks, inherent risk, the preliminary judgment about materiality and performance materiality have significant impact on the whole process of the audit and therefore they should be made in the planning phase. The acceptable audit risk helps the auditor to determine the scope and how much evidence to gather during the audit. Inherent risk is the risk of material misstatement in an account before considering the effectiveness of internal control. The assessment of inherent risk in the planning phase is to help the auditor plan the audit by deciding which parts of the audit to emphasize and the extent of testing. The performance materiality and preliminary judgment about materiality determine the nature, timing and extent of further audit procedures. Therefore, to better perform further audit procedures, these should be made in the early phase of the audit.…
After performing a discounted cash flow model, we find that the price per share of Teuer Furniture to be $30.19. We calculated the free cash flows of the company during two time periods; the period between 2013 to 2018 using an individual cohort level and the period after 2018 using Geodon Growth model to determine the terminal value of the company beyond 2018. The following table shows the expected free cash flows during the forecasting periods along with the value of the firm and its share today.…