Chapter 9

In: Business and Management

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Chapter 6
45
a) How would you determine the scope necessary to complete your audit satisfactory? Typically, the auditor would put in place an audit program that would focus on areas of high risk. The auditor would also want to assess the risk of missing controls. The CPA’s would also want to ass assess the risk of fraud and material misstatement of the financial statements. The CPA would also want to include the controls put in place by Ralph Norris. b) Yes, the CPA could be responsible for fraud. Typically, if there was fraud that was found to exist by the CPA, the CPA would follow up with the client. Lack of follow up on the fraud could lead to liability with the CPA. But, not all types of fraud are easily detectable. The audit would be set up to give reasonable assurance to detect fraud that they are material to the financial statements. If it is immaterial, the CPA would want the client to follow up.
47.
a) The auditors can determine whether Precision Industries, Inc has made proper year-end cutoff of sales transactions by knowing that all shipments are FOB shipping point. The client would advise that through a numbered sales order would count and be recorded as sales for the current year. Of course, anything after that number would be for the following year. Investigation in to whether or not the client assigns the serial sales order numbers in a sequential order.
b)It could impact A/R, sales, and net income if the sales price is reported incorrectly. The cost of the sales should also be included in the same time period. Also, this could impact beginning inventory and cost of good sold.…...

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