Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend Juarez Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.” Identify ways in which a financial statement audit adds value for clients. List services other than audits that Czarnecki and Hogan likely provides. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.

Dave Czarnecki is the managing partner of Czarnecki and Hogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he is surprised when his friend Juarez Foley asks him, “Doesn’t it bother you that your clients don’t look forward to seeing their auditors each year?” Dave responds, “Well, auditing is only one of several services we provide. Most of our work for clients does not involve financial statement audits, and our audit clients seem to like interacting with us.” Identify ways in which a financial statement audit adds value for clients. List services other than audits that Czarnecki and Hogan likely provides. Assume Czarnecki and Hogan has hired you as a consultant to identify ways in which they can expand their practice. Identify at least one additional service that you believe the firm should provide and explain why you believe this represents a growth opportunity for CPA firms.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 22E: Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different...

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Dave Czarnecki is the managing partner of Czarnecki andHogan, a medium-sized local CPA firm located outside of Chicago. Over lunch, he issurprised when his friend James Foley asks him, “Doesn’t it bother you that your clientsdon’t look forward to seeing their auditors each year?” Dave responded, “Well, auditingis only one of several services we provide. Most of our work for clients does not involvefinancial statement audits, and our audit clients seem to like interacting with us.”a. Identify ways in which a financial statement audit adds value for clients.b. List other services other than audits that Czarnecki and Hogan likely provides.c. Assume Czarnecki and Hogan has hired you as a consultant to identify ways inwhich they can expand their practice. Identify at least one additional service that youbelieve the firm should provide and explain why you believe this represents a growthopportunity for CPA firms.
Dave and Charlie are sitting at lunch one day on the premises of one of their large audit clients when the topic of going concern comes up. Dave mentions to Charlie that he vaguely recalls hearing this term in his accounting classes back in college, but doesn't remember what this means or why it is part of the audit. Which of the following responses by Charlie would help Dave to understand this? (Select all that apply.) Going concern deals with the entity's ability to continue operating as an enterprise, and is an important assumption that the auditor should evaluate. The going concern assumption is required to be evaluated by management each year for the forthcoming year. The going concern assumption is tested by evaluating management's breach of loan and debt covenants over the past three years. Going concern really speaks to the client firm's ability to pay its short-term liabilities when they come due, and whether the firm will need to refinance maturing loans to conserve cash.
Sarah O’Hann enjoyed taking her first auditing course as part of her undergraduate accounting program. While at home during her semester break, she and her father discussed the class, and it was clear that he didn’t really understand the nature of the audit process as he asked the following questions. What is the main objective of the audit of an entity’s financial statements? Given the CPA firm is auditing financial statements, why would they need to understand anything about the client’s business? What does the auditor do in an audit other than verify the mathematical accuracy of the numbers in the financial statements? The audit represents the CPA firm’s guarantee about the accuracy of the financial statements, right? Isn’t the auditor’s primary responsibility to detect all kinds of fraud at the client?
Your neighbor, Loot Starkin, invited you to lunch yesterday. Sure enough, it was no “free lunch” because Loot wanted to discuss the annual report of Dodge Corporation. He owns Dodge stock and just received the annual report. Loot says, “Our auditors prepared the audited financial statements and gave an unqualified opinion, so my investment must be safe.”Required:What misconceptions does Loot Starkin seem to have about the auditor’s role with respect to Dodge Corporation?
"Dennis Jones, an old college friend, contacted you last week. Dennis owns several car washes, and he believes that financial statement fraud may be occurring. (He pays each car wash manager a bonus if a certain level of profits is earned and is worried that some managers are overstating profits to earn a higher bonus.)Dennisiscomingovertoday to see whether you can help him determine if his suspicions are valid. He is bringing along the financial statements for each car wash (income statements, balance sheets, and cash flow statements) for the last five years.1.What kind of financial statement analysis could you perform to help Dennis detect possible fraud?"
Holly works for a firm of chartered accountants who specialise in external audit, tax advice, and retail systems. Most of your clients are small retail direct sales companies. A large national company, Rectic Plc, who operate in the same industry as several of your clients have approached you to work on their external audit after a disagreement and challenges faced with the previous auditor. They have offered a fee that would constitute 20% of the total revenue of your firm, but only on the condition that the work was completed within 2 weeks of their year end. Required: a) State and explain the 5 ethical principles outlined by the IESBA (International Ethics Standards Board for Accountants) with examples. b) If your firm accepts this engagement state five key points that must be covered by the engagement letter per ISA 210, then briefly explain the significance of the engagement letter. c) Discuss four potential ethical and other issues that your firm may face in the…
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…
The accounting firm involved in this case wants to know if their independence will be questioned by the BOA. You have been asked to submit an analysis and conclusion. 2. Franklin Rosario is an audit manager in the Salvador & Santos accounting firm. He has just been assigned to the audit of the Starex Money Market Fund. Franklin has maintained a money market account with SMMF since it opened in 2008. All his savings, amounting to 75 percent of his total assets, are in this account, which pays the highest interest available in money market funds. However, his account constitutes only .00001 percent of the fund's assets.
You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 2019. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company, he has realized a small profit for the company through foreign-exchange transactions in dollars. explain how the components of audit risk (inherent, control or detection risk) are affected.
For each of the following situations involving relations between auditors and the companies they audit, indicate whether it violates IFAC's Code of Ethics for professional accountants and the rationale for the application guideline. Asante, CPA, discloses confidential information in a peer review of the firms quality control procedures. Frank Smith, CPA, is auditing a company in Ghana, which has offered to send him and his wife on a holiday in Hawaii for two weeks. Tabula Gonzales, CPA, says in an interview in the local paper that Emilio Rios, CPA, misleads his clients about the quality of his audit work.
You are the auditor of the Oman Construction Company and have started planning for the 2020 audit engagement. As part of your planning activities, you have asked the CEO about important events during the year that might have an impact on the audit. In response, he asked you to be relaxed on auditing especially with the Chief Finance Officer because his son is seriously ill. Apparently, the child must travel regularly to the United States for expensive medical treatments. What fraud conditions are deemed present in this situation? a.None of the choices are correct b.pressure to commit fraud c.incentive to commit fraud d.rationalization to commit fraudClear my choice
Barbara Wells is a first-year auditor for a large public accounting firm. She was assigned to audit Larson Brothers; the CEO of Larson is her brother. She discussed some of her findings with family members. What is the relevant requirement (s) for the ethical behavior of an auditor? a. Qualified to carry out the scope of service b. Confidential c. All of those listed d. Independence