Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Chapter 26, Problem 23DQP
a)
To determine
Identify and discuss the issues that Company H’s internal audit department should address in its examination and assessment of B Plant’s 2016 capitalexpenditure project.
b)
To determine
Suggest the procedures to be used by Company H’s internal audit department in the auditreview of B Plant’s 2016 capital expenditure project.
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Collin Wilkes is the marketing manager at Darby Company. Last year, Collin recommended the company approve a capital investment project for the addition of a new product line. Collin’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling the new products for almost one year. The company has a policy of conducting annual post-audits on capital investments, and Collin is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Collin expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined.
Collin wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance evaluation.…
Collin Wilkes is the marketing manager at Darby Company. Last year, Collin recommended the company approve a capital investment project for the addition of a new product line. Collin’s recommendation included predicted cash inflows for five years from the sales of the new product line. Darby Company has been selling the new products for almost one year. The company has a policy of conducting annual post-audits on capital investments, and Collin is concerned about the one-year post-audit because sales in the first year have been lower than he estimated. However, sales have been increasing for the last couple of months, and Collin expects that by the end of the second year, actual sales will exceed his estimates for the first two years combined.
Collin wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance evaluation.…
Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited
$5,000,000 for the year. Lisa Bickerson, staff analyst at Halls, is preparing an analysis of the three projects under consideration by Conan Halls,
the company's owner.
(Click the icon to view the data for the three projects.)
(Click the icon to view the Future Value of $1 factors.)
(Click the icon to view the Future Value of Annuity of $1 factors.)
(Click the icon to view the Present Value of $1 factors.)
(Click the icon to view the Present Value of Annuity of $1 factors.)
Read the requirements.
Requirement 1. Because the company's cash is limited, Halls thinks the payback method should be used to choose between the capital budget
projects.
Calculate the payback period for each of the three projects. Ignore income taxes. (Round your answers to two decimal places.)
Project A
years
Project B
years
Project C
years
Using the payback method,…
Chapter 26 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQ
Ch. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 14RQCh. 26 - Prob. 15RQCh. 26 - Prob. 16.1MCQCh. 26 - Prob. 16.2MCQCh. 26 - Prob. 16.3MCQCh. 26 - Prob. 17.1MCQCh. 26 - Prob. 17.2MCQCh. 26 - Prob. 17.3MCQCh. 26 - Prob. 18.1MCQCh. 26 - Prob. 18.2MCQCh. 26 - Prob. 18.3MCQCh. 26 - Prob. 19.1MCQCh. 26 - Prob. 19.2MCQCh. 26 - Prob. 19.3MCQCh. 26 - Prob. 20DQPCh. 26 - Prob. 21DQPCh. 26 - Prob. 22DQPCh. 26 - Prob. 23DQPCh. 26 - Prob. 24DQPCh. 26 - Prob. 25DQP
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