Jim Fallon was recently promoted to senior accountant. He was put in charge of the Fresh Eats audit because of his experience with other grocery clients. Fresh Eats has a small, but growing chain of natural food stores. This is the first year Fresh Eats has been audited. Because of its growth, Mellow needs additional capital. Mellow intends to take its audited financial statements to a bank to secure a loan. Jim has been assigned two inexperienced staff assistants for the audit. Because this is his first audit as a senior, he intends to bring the job in on budget. To save time, he gave the assistants the audit program for Happy Time Food Stores. He told his staff that this would make things go more quickly. He also told them that he could not spend much time with them at the client's place of business because "my time is billed out at such a high rate, we'll go right over budget." He did call them once a day from another audit on which he was working. The assistants told Jim that the audit program did not always match up with what they found at Fresh Eats. Jim responded, "Just cross out whatever is not relevant in the audit program and don't add anything-it will only make us go over the budget." When Jim came out near the end of fieldwork, one assistant communicated her concern that they had not attended the inventory counts at any of the out-of-town locations of Fresh Eats. The audit program had stipulated that inventory should be observed for in-town stores only. Happy Time had only one store not in town while Fresh Eats had three of their five stores in other cities. Jim told the assistant to get inventory sheets from the client for the other stores. He added, "Make sure that the inventory in the general ledger agrees with the total for all the inventor Required: review the three GAAS examination standards and state if you believe that the Fresh Eats audit is in compliance with these standards. Be sure to state WHY or WHY NO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Part 2 (Ch. 2)

Jim Fallon was recently promoted to senior accountant. He was put in charge of the Fresh Eats audit because of his experience with other grocery clients. Fresh Eats has a small, but growing chain of natural food stores. This is the first year Fresh Eats has been audited. Because of its growth, Mellow needs additional capital. Mellow intends to take its audited financial statements to a bank to secure a loan.

Jim has been assigned two inexperienced staff assistants for the audit. Because this is his first audit as a senior, he intends to bring the job in on budget. To save time, he gave the assistants the audit program for Happy Time Food Stores. He told his staff that this would make things go more quickly. He also told them that he could not spend much time with them at the client's place of business because "my time is billed out at such a high rate, we'll go right over budget." He did call them once a day from another audit on which he was working. The assistants told Jim that the audit program did not always match up with what they found at Fresh Eats. Jim responded, "Just cross out whatever is not relevant in the audit program and don't add anything-it will only make us go over the budget."

When Jim came out near the end of fieldwork, one assistant communicated her concern that they had not attended the inventory counts at any of the out-of-town locations of Fresh Eats. The audit program

had stipulated that inventory should be observed for in-town stores only. Happy Time had only one store not in town while Fresh Eats had three of their five stores in other cities. Jim told the assistant to get inventory sheets from the client for the other stores. He added, "Make sure that the inventory in the

general ledger agrees with the total for all the inventor

Required:

review the three GAAS examination standards and state if you believe that

the Fresh Eats audit is in compliance

with these standards. Be sure to state WHY or WHY NOT

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