Auditing: types of reports, disclosure checklists, management representation letters

REQUIRED: (1). Discuss the types of audit reports. (2). Discuss the purpose of disclosure checklists. (3). Discuss the purposes and content of management representation letters

Audit opinion for Metropolitan Power Supply (MPS) considering Eagle Mountain costs

PROBLEM: Your firm audits Metropolitan Power Supply (MPS). The issue under consideration is the treatment of the company’s financial statements of $700 million in capitalized construction costs relating to Eagle Mountain, a vertically completed nuclear power plant. Seven years ago, MPS began construction of Eagle Mountain, w ...continues

Auditing: Restatement of financial statements. Define the deficiency.

PROBLEM: The company has found it necessary to restate its financial statements for the past two years due to a material overstatement of revenues two years ago and an equal understatement last year. The errors are due to sales of certain software that allowed the purchasers extremely lenient rights of return. The errors were d ...continues

Auditing

REQUIRED: (1) Discuss management’s four overall responsibilities with respect to internal control over financial reporting that arise from the SEC’s implementation of the Sarbanes-Oxley Act of 2002. (2) Discuss what is meant by a “walkthrough.” Must walkthroughs be performed during audits of internal control over financial r ...continues

Auditing

REQUIRED: (1).Comment on the following: “Auditors must decide, based on cost considerations, whether to test the design effectiveness or operating effectiveness of controls.” (2).Comment on the following: “All controls should be tested either prior to or on the ‘as of ‘ date.” (3).If an adverse internal control report is ...continues

Evaluating the significance of misstatements - Sun Island Apparel, Inc.

8-14 (Evaluating the significance of misstatements) You are concluding the audit of Sun Island Apparel, Inc. as of December 31, 20x1. You believe that you can tolerate $675,000 in misstatements to pretax income. You have noted only three issues that may affect the financial statements based on evidence found during the audit. ...continues

Auditing

17-27 (Substantive tests for stockholders’ equity balances) Jones, CPA, the continuing auditor of Sussex, Inc., is beginning the audit of the common stock and treasury stock accounts. Jones has decided to design substantive tests with control risk at the maximum level. Sussex has no par, no stated value common stock, and acts a ...continues

Auditing: Discuss the purpose of disclosure checklists

What are the purposes of the disclosure checklists as part of the requirements for a financial statement audit?

Audit: Division of Duties at Meridian Paint for best internal controls

The division of the duties set forth below is meant to provide the best possible controls for the Meridian Paint Company, a small wholesale store. You are to divide the duties among Robert Smith, James Cooper, and Bill Miller by placing an “X” in the appropriate column under the name of the individual who will be assigned each ...continues

Auditing

What information is provided in the auditors’ report? Does the audit report offer any guarantees? Explain. What do you think that the general public believes the auditors are providing?