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
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 23DQP
a.
To determine
Explain whether Company H is found liable to the purchasers of common stock.
b.
To determine
Specify whether Bank F is successful in its claims against Company H.
c.
To determine
Specify whether trade creditors are successful in their claim against Company H.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In order to expand its operations, Barton Corp. raised $5million in a public offering of common stock, and also negotiated a $2 million loanfrom First National Bank. In connection with this financing, Barton engaged Hanover &Co., CPAs, to audit Barton’s financial statements. Hanover knew that the sole purpose ofthe audit was so that Barton would have audited financial statements to provide to FirstNational Bank and the purchasers of the common stock. Although Hanover conductedthe audit in conformity with its audit program, Hanover failed to detect material actsof embezzlement committed by Barton Corp.’s president. Hanover did not detect theembezzlement because of its inadvertent failure to exercise due care in designing theaudit program for this engagement.After completing the engagement, Hanover issued an unqualified opinion on Barton’sfinancial statements. The financial statements were relied upon by the purchasers ofthe common stock in deciding to purchase the shares. In…
As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.
Swifty Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired
land by issuing 5,800 shares of its $20 par value common stock. The owners' asking price for the land was $139,200, and the
fair value of the land was $127,600.
1.
Blue Spruce Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it
acquired land by issuing 23,200 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale
at $290,000. The stock was selling at $11 per share.
2.
Prepare the journal entries for each of the situations above. (List all debit entries before credit entries. Record journal entries in the order
presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Dates…
As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.
1.
Bramble Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $19 par value common stock. The owners’ asking price for the land was $123,500, and the fair value of the land was $117,000.
2.
Crane Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 21,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $275,000. The stock was selling at $11 per share.
Prepare the journal entries for each of the situations above. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the…
Chapter 5 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQ
Ch. 5 - What potential sanctions does the SEC have against...Ch. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14.1MCQCh. 5 - Prob. 14.2MCQCh. 5 - Prob. 14.3MCQCh. 5 - Prob. 15.1MCQCh. 5 - Prob. 15.2MCQCh. 5 - Prob. 15.3MCQCh. 5 - Prob. 16.1MCQCh. 5 - Prob. 16.2MCQCh. 5 - Prob. 16.3MCQCh. 5 - Prob. 17DQPCh. 5 - Prob. 18DQPCh. 5 - Prob. 19DQPCh. 5 - Prob. 20DQPCh. 5 - Prob. 21DQPCh. 5 - Prob. 22DQPCh. 5 - Prob. 23DQPCh. 5 - Under Section 11 of the Securities Act of 1933 and...Ch. 5 - Prob. 25DQPCh. 5 - Prob. 26DQPCh. 5 - Prob. 27C
Knowledge Booster
Similar questions
- Your answer is partially correct. As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. Windsor, Inc. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 3,000 shares of its $20 par value common stock. The owners' asking price for the land was $126,000, and the fair value of the land was $115,500. 2. Sheridan Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $268,500. The stock was selling at $11 per share. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the…arrow_forwardAs an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. LR Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common stock. The owners’ asking price for the land was $120,000, and the fair value of the land was $110,000. 2. Vera Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $250,000. The stock was selling at $11 per share. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)arrow_forwardAs an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. 1. Monty Corp. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 4,000 shares of its $20 par value common stock. The owners’ asking price for the land was $125,000, and the fair value of the land was $118,000. 2. Wildhorse Co. is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $8 par value stock. At the time of the exchange, the land was advertised for sale at $269,000. The stock was selling at $9 per share. Prepare the journal entries for each of the situations above.arrow_forward
- As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. Wildhorse Co. is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 4,000 shares of its $20 par value common stock. The owners' asking price for the land was $126,500, and the fair value of the land was $125,000. 1. Pharoah Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $266,500. The stock was selling at $11 per share. 2. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) No. Dates Account Titles and…arrow_forwardIngram is a Certified Public Accountant (CPA) employed by Jordan, Keller and Lane, CPAs, to audit Martin Enterprises, Inc., a fast-growing service firm that went public two years ago. The financial statements Ingram audited were included in a proxy statement proposing a merger with several other firms. The proxy statement was filed with the Securities and Exchange Commission and included several inaccuracies. First, approximately $1 million, or more than 20 percent, of the previous year’s “net sales originally reported” had proven nonexistent by the time the proxy statement was filed and had been written off on Martin’s own books. This was not disclosed in the proxy statement, in violation of Accounting Board Opinion Number 9. Second, Martin’s net sales for the current year were stated as $11.3 million when in fact they were less than $10.5 million. Third, Martin’s net profits for the current year were reported as $700,000, when the firm actually had no earnings at all. a. What civil…arrow_forwardDirks was an officer of a New York broker-dealer firm that specialized in providing investment analysis of insurance company securities to institutional investors. On March 6, Dirks received information from Ronald Secrist, a former officer of Equity Funding of America. Secrist alleged that the assets of Equity Funding, a diversified corporation primarily engaged in selling life insurance and mutual funds, were vastly overstated as the result of fraudulent corporate practices. Dirks decided to investigate the allegations. He visited Equity Funding’s headquarters in Los Angeles and interviewed several officers and employees of the corporation. The senior management denied any wrongdoing, but certain corporation employees corroborated the charges of fraud. Neither Dirks nor his firm owned or traded any Equity Funding stock, but throughout his investigation he openly discussed the information he had obtained with a number of clients and investors. Some of these persons sold their holdings…arrow_forward
- Moranda and Sills, LLP, has served for over 10 years as the auditor of the financialstatements of Highland Credit Union. The firm is conducting its audit planning for the currentfiscal year and is in the process of performing risk assessment procedures. Based on inquiries andother information obtained, the auditors learned that the credit union is finalizing an acquisitionof a smaller credit union located in another region of the province. Management anticipatesthat the transaction will close in the third quarter, and, while there will be some challenges inintegrating the IT systems of the acquired credit union with Highland systems, the bank shouldrealize a number of operational cost savings over the long term.During the past year, the credit union has expanded its online service options for customers, who can now remotely deposit funds into and withdraw funds from chequing and savingsaccounts. The system has been well received by customers and the credit union hopes to continue…arrow_forwardThe 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.arrow_forwardWhile auditing the financial statements of Petty Corporation, the certified public accounting firm of Trueblue and Smith discovered that its client’s legal expense account was abnormally high. Further investigation of the records indicated the following: a. Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.b. Swindle, Fox, and Kreip were not Petty Corpora- tion’s attorneys.c. A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk.d. Boghas’s other duties included performing the endof-month bank reconciliation.e. Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.1. What control procedures could Petty Corporation have employed to prevent this unauthorized use of cash?…arrow_forward
- Mark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. Will the negligence of Mark Williams, CPA, prevent him from recovering on a liability insurance policy covering the practice of…arrow_forwardMark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. If Apex Construction also sues Williams for negligence, what are the probable legal defenses Williams’s attorney would raise?…arrow_forwardMark Williams, CPA, was engaged by Jackson Financial Development Company to audit the financial statements of Apex Construction Company, a small closely held corporation. Williams was told when he was engaged that Jackson Financial needed reliable financial statements that would be used to determine whether to purchase a substantial amount of Apex Construction’s convertible debentures at the price asked by the estate of one of Apex’s former directors. Williams performed his audit in a negligent manner. As a result of his negligence, he failed to discover substantial defalcations by Carl Brown, the Apex controller. Jackson Financial purchased the debentures, but it would not have done so if the defalcations had been discovered. After discovery of the fraud, Jackson Financial promptly sold them for the highest price offered in the market at a $70,000 loss. What liability does Williams have to Jackson Financial? Explainarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage