Part ARequired1. Using the information above, complete the calculation of accounting ratios andpercentages and comment briefly on the performance of the company for the twoyears. ( 25 Marks)2. By reference to requirement 1, identify the areas that are subject to increased auditrisk and describe the further audit work you would perform in response to those risks.( 25 Marks)Part BBy reference to Part A:1. What is the purpose of using analytical procedures on the client’s performancemeasurement system? ( 10 Marks)2. What are some of the key factors that impact group interaction in an auditassignment? ( 10 Marks)

Part ARequired1. Using the information above, complete the calculation of accounting ratios andpercentages and comment briefly on the performance of the company for the twoyears. ( 25 Marks)2. By reference to requirement 1, identify the areas that are subject to increased auditrisk and describe the further audit work you would perform in response to those risks.( 25 Marks)Part BBy reference to Part A:1. What is the purpose of using analytical procedures on the client’s performancemeasurement system? ( 10 Marks)2. What are some of the key factors that impact group interaction in an auditassignment? ( 10 Marks)

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter5: Professional Auditing Standards And The Audit Opinion Formulation Process

Section: Chapter Questions

Problem 7RQSC: Professional guidance indicates that the auditor should consider revenue recognition to be high risk...

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Similar questions

2. What are the main procedures used by an auditor when performing review or moderate assurance level engagement on financial statements of a company? (Hint: There are 3 main procedures, list the 3) _______________ _______________ _______________
An important task ¡n the audit of the revenue cycle is determining whether a client has appropriately recognized revenue. a. What is the five-step process that companies should use in recognizing revenue? Why might the auditor need to do additional research and consider additional criteria on revenue recognition? b. The following are situations in which the auditor will make decisions about the amount of revenue to be recognized. For each of the following scenarios, labeled (1) through (6): . Identify the key issues to address in determining whether or not revenue should he recognized. . Identify additional information the auditor may want to gather in making a decision on revenue recognition. . Based only on the information presented, develop a rationale for either the recognition or nonrecognition of revenue. 1. AOL sells software that is unique as a provider of Internet services. The software contract includes a service fee of $19.95 for up to 500 hours of Internet service each month. The minimum requirement is a one-year contract. The company proposes to immediately recognize 30% of the first-year’s contract as revenue from the sale of software and 70% as Internet services on a monthly basis as fees are collected from the customer. 2. Modis Manufacturing builds specialty packaging machinery for other manufacturers. All of the products are high end and range in sales price from $5 million to $25 million. A major customer is rebuilding one of its factories and has ordered three machines with total revenue for Modis of $45 million. The contracted date to complete the production was November, and the company met the contract dare. The customer acknowledges the contract and confirms the amount. However, because the factory is not yet complete, it has asked Modis to hold the products in the ware house as a courtesy until its building is complete. 3. Standish Stoneware has developed a new low-end line of baking products that will be sold directly to consumers and to low-end discount retailers. The company had previously sold high-end silverware products to specialty stores and has a track record of returned items for the high-end stores. The new products tend to have more defects, but the defects are not necessarily recognizable ¡n production. For example, they are more likely to crack when first used in baking. The company does not have a history of returns from these products, but because the products are new, it grants each customer the right to return the merchandise for a full refund or replacement within one year of purchase. 4. Omer Technologies is a high-growth company that sells electronic products to the custom copying business. It is an industry with high innovation, but Omer’s technology is basic. In order to achieve growth, management has empowered the sales staff to make special deals to increase sales in the fourth quarter of the year. The sales deals include a price break and an increased salesperson commission but not an extension of either the product warranty or the customer’s right to return the product. 5. Electric City is a new company that has the exclusive right to a new technology that saves municipalities a substantial amount of energy for large-scale lighting purposes (e.g., for ball fields, parking lots, and shop ping centers). The technology has been shown to be very cost effective in Europe. In order to get new customers to try the product, the sales force allows customers to try the product for up to six months to prove the amount of energy savings they will realize. The company is so confident that customers will buy the product that it allows this pilot-testing period. Revenue is recognized at the time the product is installed at the customer location, with a small provision made for potential returns. 6. Jackson Products decided to quit manufacturing a line of its products and outsourced the production. However, much of its manufacturing equipment could be used by other companies. In addition, it had over $5 million of new manufacturing equipment on order in a noncancelable deal. The company decided to become a sales representative to sell the new equipment ordered and its existing equipment. All of the sales were recorded as revenue.
Professional guidance indicates that the auditor should consider revenue recognition to be high risk in planning an audit of a company’s financial statements. a. Identify the activities that affect the revenue cycle. b. Identify the financial statement accounts typically associated with the revenue cycle.
Question 3: (35 Marks) As the in-charge senior auditor on the audit engagement for JA Tire Manufacturing for the year ended December 31, 2019, you are responsible for auditing the revenue cycle. The manager has instructed you to read JA Tire Manufacturing system provided on the first tab of the Excel file "Appendix 1_JATireSales_Data" before attempting this audit to familiarize yourself with the sales process and the relevant worksheets and terminology. This file contains sales transaction information for the year ended December 31, 2019. JA Tire has four sales divisions within Canada and sells primarily to large tire companies with regional warehouses that subsequently distribute to local retailers. Based on some of the risk assessment procedures already performed, you identified risks related to the fact that salespersons receive a commission on sales to distributors and the commission is calculated on a monthly basis. Your manager has asked you to perform analytical procedures as a…
Question: Assume that you are an auditor of a company. Explain any THREE categories of assertions that you will be testing when auditing the financial statements of the company. You are required to: (ii.) List the category of assertions (3 assertions) along with the element of financial statement that will be checked.
What are the main procedures used by an auditor or an accountant when performing a review or moderate assurance level engagement on financial statements of a company? (Hint: There are 3 main procedures, list the 3) _______________ _______________ _______________
Audit and Assurance - Effects of post-balance sheet events 8. Your firm is auditing the financial statement of ABCD Sdn Bhd for the year ended 30 September 2021. The plan is to complete the field work and sign the auditor report on 3o November 2021. You are asked to determine whether any events and transactions have occurred after 30 September 2021 that may affect the 2021 financial statements. Required: Identify the general types of subsequent events would require your consideration and evaluation. Discuss auditing procedures should you consider performing to gather evidence concerning subsequent event.
Describe the audit procedures you would use to learn about each of the situations listed. Begin by identifying all of the audit procedures you would use to learn about situation 1. (Select the 4 choices that apply.) A.Analyze legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. B.Review records for unusual journal entries made to the equity accounts (Common stock and Retained earnings) subsequent to year-end. C.Discuss, specifically, any related party transactions with management and include information in letter of representation. D.Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. E.Confirm details of stock transactions with registrar and transfer agent. F.Review financial statements of affiliate, and where related party transactions are apparent, make direct…
6) Cutoff tests designed to detect purchases made before the end of the year that have been recorded in the subsequent year provide assurance about management's assertion of: existence rights and obligations completeness presentation and disclosure Question 7 An engagement letter is used primarily to: disclaim liability ensure a clear contractual understanding of the services to be provided by the CPA. provide management representations to be included in the audit evidence. express an opinion on the financial statements.
QUESTION (AUDITING) 1. Briefly explain with five reasons why auditors are needed in society?2. Mention, a few characteristics that are important for an auditor to have?3. Identify and briefly discuss the inherent limitations of an audit of the set of annual financial statements of a company?
Become familiar with the several kinds of reports that go along with a company's financial statements, including the normal (unmodified) audit report.+
Determine the following as a result of your audit: subquestion a. How much is the correct amount of interest expense that should be reported in its Statement of Comprehensive Income for the period ending December 31, 2023? subquestion b. As an audit manager, you review the working papers of your audit staff and senior auditor and summarized the proposed adjusting entries (PAJE’s): Your proposed adjusting journal entry will include a credit to premium on note payable of? please show solution.