Smackey Questions

Auditors also evaluate the client’s recording of transactions by verifying the monetary amounts of transactions, a process called substantive tests of transactions. For example, the auditor might compare the unit selling price on a duplicate sales invoice with the approved price list as a test of the accuracy objective for sales transactions. Like the test of control in the preceding paragraph, this test satisfies the accuracy transaction-related audit objective for sales. For the sake of efficiency, auditors often perform tests of controls and substantive tests of transactions at the same time.

4. The final stage is the Audit Report. This is when all of the above come together to create the report. This report will list any recommendations that the auditors feel are areas in need of changes. In regard to Smackey’s, the auditors would recommend that Kim have more interaction with Henry. She needs to know more about what is happening at the loading dock. Kim needs a firsthand look at the loading dock and the paperwork. They would address the fact that Jillian puts too much trust in her sales team and is unaware of actual projections. Because of her lack of accounting knowledge, she has allowed

Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.

The audit team focused on preforming groundwork analytical procedures. A comparison of the performance of Smackey’s Dog Foods Inc to other similar industries was used to validate the original assessment of the risks. Performing the procedures helped detect areas that pose a high risk of the material misstatements. Another important part of the planning of the audit was to set a balance of materiality that is appropriate. The situations that

Moreover, the auditor should preform test for effectiveness of internal controls. He may interview management by asking questions on the process of the transactions and operational activities. He may discuss with management the process of some transactions from beginning to end and then test it by using sample testing. Also he/she should make sure that there is proper control of activities; policies and procedures for adequate segregation of duties are met.

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

To conduct the audit, the firm must acquire sufficient understanding of the internal control processes to help determine the nature and timing of the audit. However, the audit is not designed to identify deficiencies in internal control or provide assurance. The firm will make the audit committee aware of any significant deficiencies that come to Anderson, Olds, and Watershed’s attention during the audit.

Discuss the audit risk model, and ascertain which sampling or non-sampling techniques you would use in order to establish your preliminary judgment about materiality. Justify your response.

Discuss the 4 stages of the audit and the major activities performed by the auditor in each phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

Knowledge about risks related to the company evaluated as part of the auditor 's client acceptance and retention evaluation; and the relative complexity of the company 's operations. ( Auditing Standard No. 9 //. (n.d.).

In Part I of the case, you performed preliminary analytical procedures for Pinnacle (pp. 245–247). The purpose of Part II is to identify factors influencing risks and the relationship of risks to audit evidence.

Describe the governance structure at Satyam. What was the “tone-at-the-top” at Satyam during the fraud

In the Enron case, The Securities and Exchange Commission (SEC) and Congress conducted an investigation into Enron's collapse. The authorities re-examined the roles of corporate watchdogs, including corporate boards of directors, auditors, investment banks, credit rating agencies and lawyers. It could be that the watchdogs had too tight relations with the company's executives. That is why no one questioned the Enron's aggressive accounting strategies. To prevent such collapses, someone needs to look into the possible conflict of interest. The dilemma is that auditors should perform in the interests of the investors, but they are paid by the audited company, which makes it more difficult for them to exercise tough decisions. The auditors should not perform some particular consulting services for the firms that they audit. Another belief is that there should be more severe consequences for those committing financial crimes and causing fall of the companies.

2) Define what you believe the SEC meant by “Sullivan’s Audit Failures”. Do you believe Sullivan, alone, was responsible for the deficiencies that the SEC noted in the 1997 audit of Golden Bear?

D. encouraged, but not required to be described in the explanatory notes to the financial statements.