Essay on Smackey Dog Foods, Inc. by Ljubomir

The Smackey Dog Food, Inc. is a family owned business. It was started by three sisters, Sarah, Kim and Jillian, in the kitchen of their home. They lived in a suburban area of Chicago, Illinois. Their business is making all natural dog food. After using their own dogs and the neighbor’s dogs as test subjects, it was discovered by local vets, pet stores and grocery stores. These local places began to distribute the dog food. The demand for their food began to increase and they moved their business to a larger facility and hired additional workers. As compared to competitors, Smackey Dog Food, Inc., began to rise

Stage 2: Test of internal controls - By testing the effectiveness of the internal controls the auditor can determine the control risk that lies within the company. The audit team can perform tests of controls by making inquiries of appropriate client personnel, examining documents, records, and reports maintained by Smackey, observing control-related activities such as the one done for the inventory procedures for returned Best Boy Gourmet dog food, and re-perform the client procedures.

Performing internal tests of controls is intended to assess the operating effectiveness of those internal controls. Here the staff would select an area of control to test, perhaps inventory management and return policy. They would then look at the procedures that help prevent fraud or error, talk to management, and observe activities. They would notice there is very little control in place for this area. There is no management oversight or dock security measures, no direct recording of sales receipts, shipping labels, or matching to accounts receivable. This would be noted as an area of additional concern. The next stage is to perform substantive testing procedures, where the purpose is to collect audit evidence that the management assertions made in the financial statements are reliable and in accordance with GAAP. Since my staff is good, they would have noticed the company’s sales projections are weak in control and are overstated by around 11%. They would perform a substantive test of detail in this area by selecting a sample of items from the account balances and finding bank statements, invoices, and test of details of balances. They would likely see specifically where the over-projections are being made. Lastly, in finalization, they would compile a report to management detailing any important matters, evaluating the audit evidence, and considering the type of audit opinion that should be reported. Specifically here, they would

An auditor traced a sample of purchase orders and the related receiving reports to the purchases journal. The purpose of this substantive audit procedure most likely was to

Another aspect relevant to the information technology is the system-generated data and reports. If auditors choose a control that uses some information generated from the company’s internal IT system, the effectiveness of the control requires obtaining audit evidence of the accuracy and completeness of the internal information. In the ZOU’s case, when testing of the controls over risk #2, auditors use reports, which are automatically generated by the Warehouse K system. Auditors decide to further test the controls over accuracy and completeness. When testing the controls over risk #3, both monthly reporting package and budget information are somewhat generated internally by ZOU’s internal system. Depending on different systems, auditors decide to further test controls for accuracy and completeness with respect to the monthly reporting package, which is generated from PeopleSoft.

The SEC has three main purposes to serve the U.S. stock market. The first and most important is to protect investors by sustaining economic growth. In a sector as risky as the stock market the most important asset for any investor is to research. The SEC makes sure that publicly traded companies show financial statements so investors don’t blindly make financial decisions. In a private company that is not publicly traded the SEC makes sure that their financial information is not leaked. After this has been done publicly traded companies information is published and available for all to see. With reliable data available to the general public in the financial markets helps in transparency and minimizes fraud. The reason information is made public

Transactions include Existence or Occurrence, Valuation and Allocation and Presentation and Disclosure. For this purpose, Arthur Young should have inspected the records and documents, inquired, recalculated, reperformed and used analytical procedures. The types of evidence that should have been collected includes Client’s shipping documents, client prepared accounts receivable aging schedule, vendor invoices, comparisons of current year amounts with those from the prior year and management prepared financial statements and

c. The recording of transshipping transactions as retail sales. – The auditor should obtain documentation of the transshipping transaction. The auditor should then trace the

Occurrence. Obtain evidence that the loan transaction and securities purchase transactions actually took place during the year under audit.

This involves checking sales that occur at the end of a quarter against inventory, shipments, accounting records and methods. This would uncover certain sales that are put into the books but are not shipped until the next quarter, and improper sales recognition.

Securities regulations began when Congress enacted the Securities Act of 1933 in reaction to the 1929 Stock Market Crash—the infamous start of the Great Depression. The legislature created the 1933 Act to safeguard the economy from experiencing another event like the Great Depression. The objective of the Securities Act of 1933 was to “require that investors receive financial and other significant information concerning securities being offered for public sale; and prohibit deceit, misrepresentations, and other fraud in the sale of securities.” In other words, the Securities Act of 1933 required issuers to fully disclose all material information that a reasonable shareholder would require in order to make up his or her mind about a potential investment. The Act focuses on governing offerings by issuers and creating transparency between issuers and investors so that investors receive more protection than prior to the Act.

assertions. Timing and purpose of analytical procedures Analytical procedures may be performed at any of all three stages in the audit process: the planning phase, the testing phase and the

The SEC is created in the 1934 Act by Congress, primarily to enforce the newly-passed security laws, to promote overall market stability and to protect investors. Currently, the general mission of SEC is to protect investors, to facilitate capital formation, and to maintain the fair, orderly and efficient markets. SEC has the authority to set accounting and reporting standards for companies, who public trade their securities. It requires all the public companies to disclose financial and other information to the public, so that ensure all the investors have access to basic facts related to the investment before and after buying the investment. SEC oversees and regulated the U.S. security market as well as works closely with many other institutions, including federal departments, self-regulatory organization, state securities regulator and private sector organizations. SEC has five main divisions, which includes corporation finance, investment finance, enforcement, trading and marketing and economic and risk analysis. The corporation finance division regulates and ensures the public companies to offer their basic financial information to all the investors. The division also provides assistance and recommendations to the public companies related to the new and exiting rules. The division of investment management provides guidance, disclosure, rulemaking and risk

The U.S. Securities and Exchange Commission’s essential obligation is to ensure protection for investors and keep up the quality of the securities markets. The laws and standards that administer the securities business in the United States get a basic idea: all investors, whether vast organizations or private people, have to have admitted to certain essential facts around a venture before getting it. The Security and Exchange Commission requires open organizations to unveil significant money related and other data to people in general.

There are six main laws that govern the Securities Industry, but only four that are relevant to the majority of people. The first law is the Securities Act of 1933, which is often referred to as the "truth in securities". The Security Act of 1933 has two basic objectives: to require investors to receive significant information concerning securities being offered for public sale; and to prohibit deceit, misrepresentation, and other fraud in the sale of securities. These two objectives are accomplished primarily by registration which discloses important financial information. While the SEC requires this information to be accurate, there is no guarantee that it will be. However, if investors purchase securities and suffer losses due to the fact that the information given was incomplete or inaccurate they have recovery rights. The registration process requires corporations to supply the essential facts while minimizing the burden and expense of complying with the law. These requirements include a description of the company's properties and the security to be offered for sale, information about the management of the company and financial statements certified by independent accountants. If U.S. domestic companies file this information, the statements are available on