HT - Facts and Issue Exercise

PROBLEM/ DATA INFORMATION Bruce Schreiber is in charge of financial management for O-net. O-net utilizes satellite technology and sophisticated mapping software to alert its customers to trespassing, illegal dumping, and other encroachments on property these customers own around the globe. Customers typically purchase one-year contracts for this service, and the pricing depends on the number and size of sites monitored. Mr. Schreiber desires to review financial reports -- an income statement, statement of retained earnings, and balance sheet. Prepare these reports from the following adjusted trial balance. Mr. Schreiber needs this information for internal review purposes, and does not require a classified balance sheet. The operating data relate to the full year, and the blank worksheet already includes partial data. Each required input is worth 0.70 points.                             O-net CORPORATION                        Adjusted Trial Balance                        As of December…

Donald Trump the owner of a large manufacturing company, asked Joe Biden, a partner in a small audit firm (J&B Ltd), to audit the company’s records. Donald told Joe that the audit was to be completed in time to submit an audited financial report to a bank as a part of a loan application. Joe accepted the engagement immediately and agreed to provide an auditor’s report within 2 weeks. Joe hired three accounting students to conduct the audit and spent several hours telling the exactly what to do. Joe told the students not to spend time reviewing the controls or the business environment but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarising the data in the accounting records that supported Donald’s financial report. After three weeks, the students followed Joe’s instructions and gave Joe the financial report, which did not include footnotes. Joe reviewed the financial reports and prepared an unmodified report indicating that, in his…

You have worked with Zaird & Associates, CPAs, for a little more than a year and are beginning your second audit of Universal Air (UA). This year you even have an assistant reporting to you—Jane McClain. Jane has come to you with a concern. She noticed that when sales are “booked” over the Internet by credit charge, an entry is made debiting cash (from the credit card) and crediting air traffic liability. When the scheduled flight occurs, UA recognizes the revenue from the ticket. If a ticket is canceled on the Internet, the only entry made is to a database that maintains specific flight information on seat availability. Jane has discovered that customers are e-mailed a “Canceled Reservation” form when this occurs, but no accounting journal entry is recorded, and no refund occurs until the customer requests (in writing) a refund. If the customer never requests the refund, a credit to the individual’s credit card account is never issued; when they do not get refunds on their credit…

You have worked with Zaird & Associates, CPAs, for a little more than a year and are beginning your second audit of Universal Air (UA). This year you even have an assistant reporting to you—Jane McClain. Jane has come to you with a concern. She noticed that when sales are “booked” over the Internet by credit charge, an entry is made debiting cash (from the credit card) and crediting air traffic liability. When the scheduled flight occurs, UA recognizes the revenue from the ticket. If a ticket is canceled on the Internet, the only entry made is to a database that maintains specific flight information on seat availability. Jane has discovered that customers are e-mailed a “Canceled Reservation” form when this occurs, but no accounting journal entry is recorded, and no refund occurs until the customer requests (in writing) a refund. If the customer never requests the refund, a credit to the individual’s credit card account is never issued; when they do not get refunds on their credit…

Your Audit team is preparing to audit a new client in the electronic retail industry. The client imports items from manufacturers in several Asian countries and retails in a chain of shops located throughout the country.  You and your team members have access to the client's following information. ·         Prior period financial reports ·         Anticipated results for the current year ·         Industry Averages Required: Explain how you would use the information to understand your new client.

Wise Limited has an online platform for purchase and sale of goods and services which connects customers all around the world. It provides additional services of invoicing and data collation for sellers on the platform. Sellers process sales orders and transport the orders to the customers. Payment is made through the platform directly to the seller for which Wise limited collects a fee for invoicing services Further to the requirement of the Code of Corporate Governance Wise limited has decided to change its auditors after a period of 10 years. Your firm was approached and due process followed in the appointment of new Auditors including appropriate professional clearance. The audit is now set to commence. You are the Audit Manager responsible for this engagement but some of your Team members are not conversant with controls in on-line businesses.   b. A computer-based information system is expected to have general IT controls in place. Discuss the main categories of general IT…

Accounting Information Systems Read carefully the following case:Imagine that you work as an internal auditor for a company that owns several pharmacies throughout the city. Based on your audit plan, the first cycle to audit will be revenue. The first thing you do is document the processes related to receiving and processing the various sources of income. On your initial visit, you were able to observe the following:Once customers have the items to purchase, they head to the register, where a clerk processes the sale. The pharmacy has three cash registers, but does not have an employee who specifically works as a cashier at each one. This provides flexibility in the operation because, of the three employees that the business has, one can collect at any of the cashiers when available. By not having to leave a single person as a cashier, the cashier can focus on providing more direct customer service, refilling merchandise on the shelves, and even assisting in receiving or dispatching…

You are an auditor in public accounting firm and you are auditing the client's financial statements. Your client is finance company which provide credit for home appliance equipment purchase to end users. You know certainty that the identified user of the financial statement is the bank who has been the client creditors for several years. Client take a bank loan to financing their business and working capital. Client use the account receivable originally from credit sales as collateral to bank loan. When you audit account receivable materiality is set at 5%, after you have finish the audit procedures, there are found misstatements on this account receivable, and the total misstatement is 3%. What is your decision about this finding, will you conclude this as material or not? Explain the concept of materiality in this case!

Assume you are the management accountant for the Foleo Group. James and Leon have called you and the CFO into a meeting to discuss concerns they have with the number of SliFones that are being returned by customers under warranty. They have pulled some numbers from the accounting system and elsewhere regarding not only the warranty costs, but also other expenses associated with the quality of the phones for the current year. The directors have handed you the below costs and asked you to look into why faulty SliFones are being returned by customers. \table[[Quality Activity,\table[[Cost of Quality],[Activity]]],[Testing phones during production processes,$25,000

Dog

FOR THIS QUESTION IN THE ETHICAL THREAT BOX COULD YOU WRITE DOWN WHAT THREAT IT IS FOR EXAMPLE, SELF INTEREST THREAT, FAMILARITY THREAT, MANAGMENT THREAT, ETC.    PART B - QUESTION KLB plc is one of your audit clients for the previous 8 years. The following information are available. The audit team included a manager and two juniors. The client was asking to finish the audit work early this year otherwise they are going to change the auditor next year. One-week bonus was paid to the audit team through their payroll as the client was happy that they finished auditing 5 days earlier than the planned audit time. The audit team got 10% discounts on the client’s products. The same discount is normally given to the client’s staff. Your firm offered this client a bookkeeping service for this year. To reduce the audit cost, the engagement letter was not updated this year as there is no big changes in the audit tasks from last year. Audit fees are based on a percentage of the net profit before…

Your answer is partially correct. As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you with the spreadsheet below, which contains data for the most recent quarter for three companies that the firm has been recommending to its clients as "buys." Each of the companies' returns on assets has outperformed their industry cohorts in the past. But, given recent challenges in their markets, there is concern that the companies may experience operating challenges and lower earnings. (All numbers in millions, except return on assets.) Company Sprint Nextel Washington Mutual E* Trade Financial Fair Value of Company $36,351 11,582 Loss on Impairment Account Titles and Explanation Goodwill 1,628 eTextbook and Medial Book Value (Net Assets Including Goodwill) $51,201 23,941 4,024 Carrying Value of Goodwill $30,618 9,052 2,015 (c) Estimate the amount of goodwill…

Greenwor Manufacturing Company You have been hired to investigate possible fraud losses in Greenwor Manufacturing Company. Greenwor’s attorney contacted you in confidence and told you that she has had many tips indicating that Chad Wits, the CFO, is somehow stealing large sums of money from the company. Wits earns a good salary of $300,000 per year, but company employees report that he has recently purchased a $4 million house, a sail yacht worth at least $2 million, and one employee said that he spends his weekends in Las Vegas, where he loses very large sums of money on a regular basis. Some employees have seen him driving a new Maserati sports car near a local shopping mall, but he always arrives at work with a plain, aged family car.Requireda) What steps would you take to conduct your investigation?b) What information would you need to develop a fraud theory?c) Does the information you currently have provide sufficient predication for an investigation?

Sanju

Assume you are the lead forensic investigator for a potential fraud case at AJB, Inc. After searching public records and other Internet sources, you accumulate the following financial information for the suspected fraud perpetrator, Jaleesa P. Crimin.   YEAR 1 YEAR 2 YEAR 3 Assets:       Residence #1 $243,000 $243,000 $243,000 Residence #2     138,000 Stocks and bonds 15,000 30,000 57,000 Automobiles 27,000 52,500 52,500 Boat   34,500 34,500 CD 12,000 42,000 81,000 Cash 5,670 12,150 29,160 Liabilities:       Mortgage balance #1 136,080 68,040 16,200 Mortgage balance #2     138,000 Auto loans 18,000 57,000   Boat loan   34,500 9,000 Income:       Salary   78,750 82,650 Interest/other   8,730 17,790 Expenses:       Mortgage payments   24,300 42,120 Auto loan payments   9,720 9,720 Boat…

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Accounting & Finance - Auditing  Question 6: Your audit firm has an advertising policy that any audit process will not take more than 20 days for any client. You start reviewing the audit files of your client ALB plc which you audit for eight years and you find the following notes. The audit team included a manager who owns 1% of the ALB’s shares. The executive partner believes that the 1% is too small and it will not affect the manager experience. Your firm offered this client a bookkeeping service for this year. One of the audit team received a high salary offer to be appointed in the client’s internal audit department as a head of department. The finance director was recently working as an auditor in your audit firm. ALB plc intends to increase its capital by issuing more shares in the stock market and the financial manager is asking your firm to manage this process.  Required:  Identify and explain FIVE ethical threats which arise from the above actions and for each…

Internal Controls     An employee of JHT Co., a private trucking company, was responsible for resolving roadway accident claims under $25,000.  The employee created fake accident claims and wrote settlement checks between $5,000 and $25,000 to friends or acquaintances acting as phony “victims.”  One friend recruited subordinates at his place of business to cash some of the checks.  In addition, the JHT employee also recruited lawyers, who he paid to represent both the trucking company and the fake victims in the bogus accident settlements.  When the lawyers cashed the checks, they allegedly split the money with the corrupt JHT employee.  This fraud went undetected for two years.   Please answer the following questions:   What weaknesses in internal control contributed to this fraud? Why would it take so long to discover such a fraud? What control procedures should be changed to prevent such fraud?

(Receivables Management) As the manager of the accounts receivable department for Beavis Leather Goods, Ltd., you recently noticed that Kelly Collins, your accounts receivable clerk who is paid $1,200 per month, has been wearing unusually tasteful and expensive clothing. (This is Beavis’s first year in business.) This morning, Collins drove up to work in abrand new Lexus.Naturally suspicious by nature, you decide to test the accuracy of the accounts receivable balance of $192,000 as shown in the ledger. The following information is available for your first year (precisely 9 months ended September 30, 2017) in business.(1) Collections from customers $188,000(2) Merchandise purchased 360,000(3) Ending merchandise inventory 90,000(4) Goods are marked to sell at 40% above cost.InstructionsAssuming all sales were made on account, compute the ending accounts receivable balance that should appear in the ledger, noting any apparent shortage. Then, draft a memo dated October 3, 2017, to Mark…

You are an audit manager in Smith & Co, a firm of Chartered Certified Accountants. You have recently been made responsible for reviewing invoices raised to clients and for monitoring your firm’s credit control procedures. Several matters came to light during your most recent review of client invoice files: Norman Co, a large private company, has not paid an invoice from Smith & Co dated 5 June 2007 for work in respect of the financial statement audit for the year ended 28 February 2007. A file note dated 30 November 2007 states that Norman Co is suffering poor cash flows and is unable to pay the balance. This is the only piece of information in the file you are reviewing relating to the invoice. You are aware that the final audit work for the year ended 28 February 2008, which has not yet been invoiced, is nearly complete and the audit report is due to be issued imminently. Wallace Co, a private company whose business is the manufacture of industrial machinery, has paid all…

Your public accounting practice is located in a city of 15,000 people. The majority of your work, conducted by you and two assistants, consistsof compiling clients’ monthly statements and preparing income tax returns for individuals from cash data and partnership returns from books and records. You have a small number of audit clients; given the current size of your practice, you generally consider it a challenge to accept new audit clients.One of your corporate clients is a retail hardware store. Your work for this client has been limited to preparing the corporate income tax return from a trial balance submitted by the bookkeeper.On December 26, you receive from the president of the corporation a letter containing the following request:We have made arrangements with First National Bank to borrow $500,000 to finance the purchase of a complete line of appliances. The bank has asked us to furnish our auditors’ certified statement as of December 31, which is the closing date of our…