ACCT 555 Week 8 Final Exam Complete A+ Answer

1. (TCO A) There are ten generally accepted auditing standards, divided into three categories. What are the standards of reporting?

2. (TCO A) Distinguish between generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP). What professional organization establishes GAAS? What professional organization

establishes GAAP?

3. Assume you are the partner in charge of the audit of Franklin Corporation’s 2002 financial statements. The audit report has not yet been prepared. In each independent situation following, indicate the appropriate opinion

you should issue and why you would issue that opinion

4. State whether there is any violation of the AICPA Code of Professional Conduct, and the nature of the violation. Where there is a violation, evaluate the potential legal liability the accountant may face. Justify your position

5. Discuss at least five of the actions that can be taken by individual CPAs, to protect themselves from legal liability

6. (TCO E) Bobby Thigpen, waiter at Relief Stop, has been taking cash from the restaurant. Thigpen prepares a customer’s check from which the customer pays. Thigpen then destroys the check, and prepares a new one

with different items of lower cost. He presents the new check and indicated amount on the check to the cashier, and saves the excess cash for himself. Question: Formulate three internal control features that the restaurant

could implement, to eliminate this defalcation

7. Three types of legal documents and records that auditors examine in the planning phase of an audit are the corporate charter and bylaws, corporate minutes of meetings of the board of directors and stockholders, and

contracts. Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be aware of early in the audit.

1. (TCO F) What are specific audit objectives? Explain their relationship to the general audit objectives. (Points: 25)

2.(TCO H) Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts (segments) in the financial statements. Also explain why allocating to balance sheet accounts is more

common than allocating to income statement accounts. (Points: 25)

Allocating the preliminary judgment about materiality to individual segments is necessary because evidence is accumulated for segments rather than for the financial statements as a whole. Allocating to segments establishes a

tolerable misstatement amount for each segment, which helps the auditor decide the appropriate audit evidence to accumulate for each segment. Most practitioners allocate materiality to balance sheet accounts rather than

income statement accounts because there are fewer balance sheet than income statement accounts

3. (TCO I) For each of the following potential misstatements, provide one potential audit test that could be used to detect the misstatement

4. (TCO I) Describe how the auditor tests the classification objective for accounts receivable. (Points: 25)

The classification objective is tested by reviewing the aged trial balance for material receivables from affiliates, officers, directors, or other related parties. If notes receivable or accounts that should not be classified as a

current asset are included with the regular accounts, these should also be segregated. Finally, if credit balances in accounts receivable are significant, it is appropriate to reclassify them as accounts payable

5. The design of tests of details of balances for inventory is affected by audit results from multiple cycles. Identify the cycles, other than the inventory and warehousing cycle, that affect the audit of inventory

6. Describe three computer auditing techniques available to the auditor

7. (TCO K) Match seven of the terms (a-p) with the description/definitions provided below (1-7):

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ACCT 555 Final Exam

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