Question 1. You have been hired by a Regional CPA firm to perform audits on their largest clients. Explain what Standards of Field work you would be required to adhere to and why.

Question 2. Below is an audit report - please explain what is wrong with this report. Note: There are at least 17 deficiencies - please give at least 5 of those deficiencies:

Question 3.

Given these facts, calculate return on assets, current ratio, and return on equity:

Sales $8,200,000
Net income 2,050,000
Average total assets 7,100,000
Average total liabilities 3,500,000
Current Assets-yr-end 1,800,000
Current Liabilities-
Year-end 1,600,000
Total Year-end Assets 7,400,000

Question 4. Your client shows interest expense on the books of $26,500. You receive bank loan balances which reflect loan balances at each month-end as :

1) What is the correct interest expense that should be on the books at year end?

2) Where would you get your information on the interest rate and loan balances each month?

Question 5.

Two auditors, Mary and Susan, independently assessed the risks associated with their client's accounts receivable. The appropriate audit risk is determined to be 5% for Mary. Susan determines that the audit risk for his client is 6%.

The inherent risk is assessed at 35% and 72% for Mary and Susan respectively. Mary evaluates the control risk at 55% while Susan assesses control risk at a relatively low 30%. Using the audit risk model please answer the following questions:

a. What is the detection risk percent for both Mary and Susan?

b. Which auditor, Mary or Susan , will have to collect the most account balance evidence for accounts receivable based on their evaluation in part a above?

Question 6. A Remington School District employee has been charged with theft and forgery for allegedly stealing approximately $72,000 in district funds.

(1) What factors allowed these frauds to occur?
(2) What do you think the school district should do in the future to prevent fraud from occurring in the future?
(3) What responsibility do you feel the current school external auditor has to detect this fraud?
(4) How have the three elements of the Fraud Triangle enabled Mary to commit this fraud?

Question 7. The 1136 Tenants v. Max Rothenberg and Company case (Chapter 5) established the need for an Engagement Letter at the start of an audit. Discuss at least six of the matters that should be specified in an engagement letter. Explain why this upfront Engagement Letter is so important.

Question 8. One objective of audit of a water utility for a small city is to determine whether all customers are being billed. Select the best "direction of testing" from the options below and explain why you selected that option.

(a) Meter Department records to the sales register.

(b) Sales Register to the meter department records.

(c) Accounts receivable ledger to the sales register.

(d) Sales Register to the Accounts receivable ledger

Question 9. Accounts Receivable - For each of the following, please explain if an auditor's review of the client's sales cutoff would detect these problems:

(a) Would excessive goods returned for credit be detected by a sales cut-off test - why or why not?
(b) Would unrecorded sales discounts be detected by a sales cut-off test - why or why not?
(c) Lapping of year-end accounts receivable be detected by a sales cut-off test - why or why not?
(d) Inflated sales for the year - could it be detected by a sales-cut-off test - why or why not? (Points : 25)

Question 10. (1) Identify the Processing Controls associated with a Computerized System and identify the types of tests to be performed. (2) Identify the issues which an E-Commerce System presents for an auditor.

Question 11. You are the Senior Auditor for WWZ Co. and you have completed the testing of all the accounts. However, prior to issuing your report, what are at least five other procedures or reviews that must be performed prior to issuing your report? Explain your responses.