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Explain how audit risk and materiality are related and why they need to be considered together in planning an audit.
Explain why Ling set performance materiality for cash at the lowest amount.
A CPA firm should decrease acceptable audit risk for audit clients when external users rely heavily on the statements.
WRS's Board of Directors is controlled by Tucker, the majority shareholder, who also acts as the chief executive officer.
The client engages in several material transactions with entities owned by family members of several of the client's senior executives.
What is meant by setting a preliminary judgment about materiality? Identify the most important factors affecting the preliminary judgment.
Distinguish between the terms performance materiality and preliminary judgment about materiality. How are they related to each other?
What qualitative factors should she also consider in deciding whether misstatements may be material?
What is the purpose of the AICPA Code of Professional Conduct restriction on commissions as stated in Rule 503?
Providing bookkeeping services to a public company. The services were preapproved by the audit committee of the company.
Bruce Sullivan, CPA, is the audit partner on the engagement of Xylium Corporation, which is a public company.
The auto dealership has an executive lunchroom that is available free to employees above a certain level.
What does it mean for the audit committee members to be "independent"?
Compare the importance of independence of CPAs with that of other professionals, such as attorneys.
Explain the principles portion of the Code of Professional Conduct. How do the principles relate to the rules of conduct?
Discuss whether the facts in any of the situations indicate violations of the Code of Professional Conduct. If so, identify the nature of the violation(s).
When Barbara asked about the possible audit adjustment regarding the small items, none of which arose from the first 10 items, Jack responded.
What do you think of Bob Smith's actions to help Arnold? Where does one draw the line between ethical and unethical behavior?
Under PCAOB auditing standards, all working paper documentation for an audit of a publicly traded client should be completed within 45 days of the audit report
Distinguish between business failure and audit risk. Why is business failure a concern to auditors?
Discuss why many CPA firms have willingly settled lawsuits out of court. What are the implications to the profession?
What is meant by contributory negligence? Under what conditions will this likely be a successful defense?
Contrast the auditor's liability under the Securities Act of 1933 with that under the Securities Exchange Act of 1934.
A lawsuit has been filed against Carter Hockaday, CPA, charging him with constructive fraud in the audit of Broughton Company's financial statements.
Would the issues or outcome be significantly different if the suit was brought under the Securities Exchange Act of 1934?