Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 24, Problem 23.1MCQ
To determine
Explain the auditor reporting on acquisition of 25% of the outstanding capital stock by a client after year but prior to the date of auditor’s report.
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You are an auditor of the company ABC. During the audit of the accounting statements it is found that ABC has recognized in its assets the following elements:a) goods which are immovable for a period of 3 years and which are valued at their acquisition priceb) goods owned by XIZ that it has to sell on its behalf with a commission of 10%; andc) the remuneration of the lawyer who represented the company in a legal dispute.
Based on the conceptual framework of accounting, comment on the above.
You are required to prepare the consolidated statement of financial position as at 31 December x7. Assume:
i. Non-controlling interest is measured based on the net assets of the investee on the acquisition date.
il. Non-controlling interest is measured based on its fair value.
Chapter 24 Solutions
Auditing And Assurance Services
Ch. 24 - Prob. 1RQCh. 24 - Explain why an auditor is interested in a clients...Ch. 24 - Prob. 3RQCh. 24 - Prob. 4RQCh. 24 - Prob. 5RQCh. 24 - Prob. 6RQCh. 24 - Prob. 7RQCh. 24 - Prob. 8RQCh. 24 - What major considerations should the auditor take...Ch. 24 - Identify five audit procedures normally done as a...
Ch. 24 - Prob. 11RQCh. 24 - Prob. 12RQCh. 24 - Prob. 13RQCh. 24 - Prob. 14RQCh. 24 - Prob. 15RQCh. 24 - Prob. 16RQCh. 24 - Prob. 17RQCh. 24 - Prob. 18RQCh. 24 - Prob. 19RQCh. 24 - Prob. 20.1MCQCh. 24 - Prob. 20.2MCQCh. 24 - Prob. 20.3MCQCh. 24 - Prob. 21.1MCQCh. 24 - Prob. 21.2MCQCh. 24 - Prob. 21.3MCQCh. 24 - Prob. 22.1MCQCh. 24 - Prob. 22.2MCQCh. 24 - Prob. 22.3MCQCh. 24 - Prob. 23.1MCQCh. 24 - Prob. 23.2MCQCh. 24 - Prob. 23.3MCQCh. 24 - Prob. 24DQPCh. 24 - Prob. 25DQPCh. 24 - Prob. 26DQPCh. 24 - Prob. 28DQPCh. 24 - Prob. 29DQPCh. 24 - Prob. 32DQPCh. 24 - Prob. 33DQP
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- You are assigned to perform a review of minutes of meeting for the year end audit ending December 31, 2021. Which of the following agendas would least likely affect the total liabilities of the entity? A. The payment of real property taxes for the year 2021 at the beginning of 2021. B. The approval of the board of directors of the issuance of a S-year term bond last September 2021. C. Property dividends declared on December 27, 2021 D. The settlement of a pending litigation with another entity on January 5, 2022.arrow_forwardConsider the following material and independent situations (i) to (iii) below.In each situation, the following dates apply:• Balance date: 30 June 2021• Date of audit report: 16 August 2021• Audited financial report and audit report sent to shareholders: 23 August 2021• Annual general meeting: 30 September 2021(i) The client purchased raw materials that were received before the financial year end. The purchase was recorded based on its estimated value. The supplier’s invoice, received on 30 July 2021, showed that the cost was substantially different from the estimated value.(ii) On 10 August 2021, the directors signed a contract to upgrade the client’s airconditioning system. The first payment of $100,000 is due on 1 September 2021. Work will be completed by 30 June 2022, and the final contract payment will be made at that time.(iii) On 25 August 2021, the general manager informed you that on 18 August 2021 the directors decided to sell land that the client was holding as a long-term…arrow_forwardYour client, Lewison International, has informed you that it has reached an agreement with Herro Company to acquire all of Herro’s assets. This transaction will be accomplished through the issue of Lewison’s common stock. After your examination of the financial statements and the acquisition agreement, you have discovered the following important facts. The Lewison common stock issued has a fair value of $800,000. The fair value of Herro’s assets, net of all liabilities, is $700,000. All asset book values equal their fair values except for one machine valued at $200,000. This machine was originally purchased two years ago by Herro for $180,000. This machine has been depreciated using the straight-line method with an assumed useful life of 10 years and no salvage value. The acquisition is to be considered a taxfree exchange for tax purposes. Assuming a 30% tax rate, what amounts will be recorded for the machine, deferred tax liability, and goodwill?arrow_forward
- Which of the following may not be included in a typical audit program for auditing Retained Earnings? a. Reference to market quotations for the granting of share options to employees. b. Reference to fair market value of real property declared as property dividends. c. Determination of the effect of a change in policy regarding the use of average cost formula for inventories for the current year, where the entity previously elected the first-in-first-out cost formula. d. Reference to market quotations for the declaration of a 10% stock dividends.arrow_forwardStatement I: The equity securities issued as part of the consideration transferred shall be measured at the fair value of the shares at the date of acquisition.Statement II: The goodwill in the books of the acquiree shall be measured at its fair value at the date of acquisition. a. True, False b. False, True c. True, True d. False, Falsearrow_forwardIf PROMDI Co., a new company would acquire the net assets of CARDO Co and SYANO Co. PROMDI Co will be issuing 30,000 shares to CARDO and 12,000 shares to SYANO. The following is the balance sheet of PROMDI Co, followed by the fair values and additional unpaid costs incurred by PROMDI in the acquisition: Compute for the total liabilities at the date of acquisitionarrow_forward
- The auditors join client stock take at the year end and see whether the way that they count is in the correct procedures or not. This procedure is an example of: * Observation Inquiry Inspection of tangible assets O Inspection of records and documentsarrow_forwardA company had excess funds at the beginning of 2021. The investment committeedecided to purchase marketable securities, the sale and acquisition of investmentswere delegated to a certain company official. The best person to make periodicreviews of the investments activity would be the: choices: Chief operating officerTreasurerCorporate controllerThe investment committeearrow_forwardAt what amount should the Notes payable be valued at December 31, 2020 in the statement of financial position?arrow_forward
- By how much is the refundable deposit over or (under)stated at year end 2020?arrow_forwardFor a publicly owned company, indicate which of the fol-lowing accounting activities are likely to occur at or shortly after year-end. (More than one answer may be correct.)a. Preparation of income tax returns.b. Adjusting and closing of the accounts.c. Drafting of disclosures that accompany the fi nancialstatements.d. An audit of the fi nancial statements by an independentCPA fi rm.arrow_forwardThe following audit procedures are commonly performedby auditors in the verification of owners’ equity:1. Review the articles of incorporation and bylaws for provisions about owners’ equity.2. Analyze all owners’ equity accounts for the year and document the nature of anyrecorded change in each account.3. Account for all certificate numbers in the capital stock book for all shares outstanding.4. Examine the stock certificate book for any stock that was cancelled.5. Review the minutes of the board of directors’ meetings for the year for approvalsrelated to owners’ equity.6. Recompute earnings per share.7. Review debt provisions and senior securities with respect to liquidation preferences,dividends in arrears, and restrictions on the payment of dividends or the issue of stock.a. State the purpose of each of these seven audit procedures.b. List the type of misstatements the auditors can uncover by the use of each auditprocedure.arrow_forward
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