Smackey Dog Foods, Inc
Smackey Dog Foods, Inc
Smackey Dog Foods, Inc
Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
Solution:
The SEC assists in providing investors with reliable information upon which to make investment decision. The Securities Act of 1933 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval. The Securities Exchange Act of 1934 provides additional protection by requiring public companies and others to file detailed annual reports with the commission. The SEC has considerable influence in setting generally accepted accounting principles (GAAP) and disclosure requirement for financial statements as a result of its authority for specifying reporting requirements considered necessary for fair disclosure to investors. The SEC has power to establish rules for any CPA associated with audited financial statements submitted to the commission. With Smackey Dog Food,
Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?
Solution:
Audit Planning consist of the following:
1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make a important decisions. The auditor wants to make this decision early, before incurring any significant cost that cannot be recovered. With Smackey Dog Food, Keller CPA had time to devote to the audit and therefore accepted the job.
2. The auditor identifies why the client wants or needs an audit. This information is likely to affect the remaining parts of the planning process.
3. To avoid misunderstandings, the auditor obtains an understanding with the client about the terms of the engagement. With Smackey Dog Food, the auditors sent over the audit staffers to assess the client and plan the audit.
4. The auditor develops an overall strategy for the audit, including engagement staffing and any required audit specialist.
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:
The 4 stages of the audit:
1) Standard unqualified – the five conditions have been met, 1. All statements are included in the financial statements 2. The 3 general standards have been followed in all respects on the engagement 3) sufficient evidence has been accumulated, and the auditor has conducted the engagement in a manner that enables him or her to conclude that the 3 standards of field work have been met. 4) the financial statements are presented in accordance with US generally accepted accounting principles. 5) there are no circumstances requiring the addition of an explanatory paragraph or modification of the wording of the report.
2) Unqualified with Explanatory Paragraph or Modified Wording – a complete audit took place with satisfactory results and financial statement that are fairly presented, but the auditor feels it is important to provide additional information.
3) Qualified – The auditor concludes that the overall financial statements are fairly presented, but the scope of the audit has been materially restricted or GAAP were not followed in preparing the financial statements.
4) Adverse or Disclaimer – the auditor concludes that the financial statement are not fairly presented, he or she is unable to form an opinion that financial statements are fairly presented or he or she is not independent.
Describe Keller CPAs responsibilities related to communications regarding internal control matters. What internal controls issues do you identify?
Solution:
1. Recorded transactions exist (occurrence).
2.