What are the relevant accounts when auditing debt obligations, and what is the auditor's primary objective?
What are the relevant accounts related to stockholders' equity transactions?
Identify common transactions affecting stockholders equity accounts.
Describes the disclosures related to stockholders' equity provided by Ford Motor Company.
Identify common inherent risks associated with debt obligations.
During the course of the audit of Nature Sporting Goods, the auditor discovered the following:
• The accounts receivable confirmation work revealed one pricing misstatement. The book value of $12,955.68 should be $11,984.00.
The total misstatement based on this difference is $14,465, which includes a $972 known misstatement and an unknown projected misstatement of $13,493.
• Nature Sporting Goods had understated the accrued vacation pay by $13,000. A review of the prior-year documentation indicates the following uncorrected misstatements:
o Accrued vacation pay was understated by $9,000.
o Sales and accounts receivable were overstated by an estimated $60,000 because of cutoff errors.
• Prepare a summary of a possible adjustments schedule and draw your conclusion about whether the aggregate effect of these misstatements is material. Use the trial balance numbers shown in Exhibit 14.1, but ignore the misstatements shown in the exhibit.
The income tax rate is 40% for the current and prior year. (Note: Materiality must be considered in developing your answer.)