The client and our firm have agreed on an initial estimated audit fee of $32,000 (see the engagement letter). However, the estimated total cost of performing this year’s audit is $37,590 (see the fee budget on workpaper 6-5). Discuss possible reasons why a CPA firm might charge a new client an audit fee that is lower than the estimated first-year costs of performing the audit.

As the auditor of Komsu Air Limited (KAL) that manufactures and installs large commercial airconditioning systems. KAL typically has two or three large contracts (ranging from $6 million to $10million each) in progress at any one time. The contracts usually take up to six months to complete,although unexpected on-site difficulties can result in lengthy delays in completion (of up to 12months). KAL finances its operations with a mixture of equity, long-term debt (secured by fixed assets)and short-term bank loans.It is now May 2017 and your planning of the audit of KAL for the year ended 30 June 2017 is nearingcompletion. You have met with the management of KAL and, from those discussions and a review ofthe preliminary information provided by KAL, you have identified several issues that may haveimplications for the company’s ability to continue as a going concern. The relevant issues are asfollows: Competition in the industry is becoming more intense, with some customers now installing…

The audit firm receives 40% of its total revenue from one audit client. this is an example of: Select one: O a. Familiarity threat. B) Self-review threat. C) Intimidation threat. d) Self-interest threat.

SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs for SAP equal 50% of revenue. $5.64 million $4.80 million $4.51 million $5.93 million

The public accounting firm of Hanson and Brown was expanding very rapidly. Consequently, it hired several staff assistants, including James Small. Subsequently, the partners of the firm became dissatisfied with Small’s production and warned him that they would be forced to discharge him unless his output increased significantly. At that time, Small was engaged in audits of several clients. He decided that, to avoid being fired, he would reduce or omit entirely some of the required auditing procedures listed in the audit plan prepared by the partners. One of the public accounting firm’s non-SEC clients, Newell Corporation, was in serious financial difficulty and had adjusted several of its accounts being examined by Small to appear financially sound. Small prepared fictitious working papers in his home at night to support purported completion of auditing procedures assigned to him, although he in fact did not examine the Newell adjusting entries. The public accounting firm rendered an…

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As the auditor of Komsu Air Limited (KAL) that manufactures and installs large commercial airconditioning systems. KAL typically has two or three large contracts (ranging from $6 million to $10million each) in progress at any one time. The contracts usually take up to six months to complete,although unexpected on-site difficulties can result in lengthy delays in completion (of up to 12months). KAL finances its operations with a mixture of equity, long-term debt (secured by fixed assets)and short-term bank loans.It is now May 2017 and your planning of the audit of KAL for the year ended 30 June 2017 is nearingcompletion. You have met with the management of KAL and, from those discussions and a review ofthe preliminary information provided by KAL, you have identified several issues that may haveimplications for the company’s ability to continue as a going concern. The relevant issues are asfollows: Competition in the industry is becoming more intense, with some customers now installing…

The Environmental Protection Agency (EPA) is in the process of investigating a possible water contamination issue at the manufacturing facility of Northwest Forest Products. The EPA has not yet proposed a penalty assessment. Management feels an assessment is reasonably possible, and if an assessment is made, an unfavorable settlement is estimated between $20 and $30 million. How should Northwest Forest Products report this situation in its current financial statements?

Carinal Ltd. specializes in the development of electronic components within quite acompetitive environment causing concerns for marketing and pricing. Its non-current assetsprimarily include IT software, property, and investments, and there have been additions tothese during the year.As audit manager, you are conducting a preliminary analytical review and associated riskanalysis for this client for the year ended June 30 2022. You have been presented with thefollowing draft financial information about Carinal with incomplete ratios and percentagescalculation.  INCOME STATEMENT                                                                                                   Year ended June 30                                                                                                           2022      2021                                                                                                          $'000      $'000Revenue…

WatchNU is a company that designs and manufacturers drones for military use. The supply manager is getting ready to renegotiate the contract with the security service provider that it uses for its offices and manufacturing plant. Three suppliers responded to the RFP for security services for the next three years. The current security services provider, SecurelT quoted $920,000 per year. Two suppliers that have not been used by WatchNU in the past quoted $835,000 and $742,000 respectively. The supply manager is also analyzing the costs associated with insourcing security services rather than using a supplier as a way to reduce costs and provide greater control over security. The salary and benefits for a full-time security services manager is estimated to be $91,000. Other fixed costs are estimated to be $21,000/year. Three security guards are needed 24 hours/day, 365 days per year. The salary and benefits for the security guards is $26/hour. a. What are the costs to insource the…