Acct555 Essay

1753 Words May 3rd, 2013 8 Pages
Worksheet for You Decide

Name: Course Code Acct555 Grade ___/ Date: February 13, 2013

Questions:

Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.

Solution:

The SEC does have substantial influence on the audit of the company, by the auditing firm Keller CPAs. The influence can be observed in the audit standards that have to be followed in establishing the independence of auditors involved in the audit of the Company.
Independence is one of the six ethical principles of the AICPA Code of Professional Conduct.
Audit team members are required to be objective and independent with regards to the audit by maintaining objectivity and being free of conflicts of interest in discharging
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4. The audit team needs to now set materiality and assess the tolerable audit risk and inherent risk. The circumstances of Smackey have to be taken into account in setting materiality level as this is subject to the auditor’s judgment. 5. The audit team needs to develop an overall audit plan and audit program. This will allow the team to accomplish the audit risk objectives of the team and to provide reasonable assurances and basis for the audit report and the opinion.

Q3: Discuss the 4 stages of the audit and the major activities performed by the auditor in each phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

Solution:

1. The planning and risk assessment. Obtaining the understanding of the business and the industry can primarily assess the risks. The firm needs to look at the companies internal control procedures; also the processes and systems are reviewed so the audit team can evaluate the control risk for each transaction connected audit objectives. 2. The audit team needs to test internal controls. The audit team can examine documents, records, and client personnel. The audit firm can also look at the companies control related activities like inventory procedures for returned dog food. 3. The audit firm needs to preform substantive tests on the balance of

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