Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income before taxes = $3.5 million, (2) total assets = $33 million, and (3) total revenues $95 million. Emma's Designs is considered a moderate-risk audit, but Accounts Receivable is deemed to have a higher risk of misstatement. a. Determine overall materiality and tolerable misstatement. Justify your decisions. = b. During the course of the audit, Emma's CPA firm detected one misstatement in a key customer's Accounts Receivable equal to $90,000. The firm also detected a second misstatement in Cash equal to $10,000. Evaluate the audit findings. Justify your decisions. Emma's Designs is a for-profit clothing manufacturer. The components of its financial statements are (1) income before taxes = $3.5 million, (2) total assets = $33 million, and (3) total revenues $95 million. Emma's Designs is considered a moderate-risk audit, but Accounts Receivable is deemed to have a higher risk of misstatement. a. Determine overall materiality and tolerable misstatement. Justify your decisions. = b. During the course of the audit, Emma's CPA firm detected one misstatement in a key customer's Accounts Receivable equal to $90,000. The firm also detected a second misstatement in Cash equal to $10,000. Evaluate the audit findings. Justify your decisions.
Expert Answer:
Answer rating: 100% (QA)
1 To determine the overall materiality and tolerable misstatement we need to first calculate the preliminary materiality using a benchmark of Emmas De... View the full answer
Related Book For
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt
Posted Date:
Students also viewed these accounting questions
-
For each of the following scenarios, perform the three steps in the materiality process: (1) determine overall materiality, (2) determine tolerable misstatement, and (3) evaluate the audit findings....
-
Required a. Use professional judgment in deciding on the preliminary judgment about materiality for earnings, current assets, current liabilities, and total assets. Your conclusions should be stated...
-
List three specific parts of the Case Guide, Objectives and Strategy Section (See below) that you had the most difficulty understanding. Describe your current understanding of these parts. Provide...
-
An analog filter is defined by its transfer function: 100n H(s) = %3D s+ 100n What type of filter H(s) is? A. Low-pass B. High-pass C. Band-pass D. Band-stop
-
A 1-m3 tank is filled with a gas at room temperature 20C and pressure 100 kPa. How much mass is there if the gas is a) air, b) neon or c) propane?
-
Exercise 2.51 on page 71 discusses the use of toenail clippings to measure the level of arsenic exposure of individuals in Great Britain. A similar study was conducted in the US. Table 2.23 gives...
-
The heading in a cash flow statement 'Cash flows from financing activities' means: a The cash outflow due to loan interest payments being made b The cash flow from share and loan issues and...
-
The Millikan Oil-Drop Experiment The charge of an electron was first measured by the American physicist Robert Millikan during 1909-1913. In his experiment, oil is sprayed in very fine drops (around...
-
While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE),...
-
Pistol Corporation acquired 70 percent of Scope Corporations voting stock on May 18, 20X1. The companies reported the following data with respect to intercompany sales in 20X4 and 20X5: Pistol...
-
co 51 ew Homework: Week 3 Homework (7.1-7.3) Score: 0 of 6 pts nis 7.1.13 Assigned Media 3 of 15 (0 complete) ne Use the sample data and confidence level given below to complete parts (a) through...
-
List the individual financial statements normally included in a complete set and indicate which phrase of the opinion paragraph applies to each statement.
-
Ages of dogs at a rescue facility. In Exercises 714, determine whether the data are qualitative or quantitative. Explain your reasoning.
-
Which of the following is true of audit sampling? a. A sample is less time-consuming and provides less assurance than examining all items in the population. b. A sample is less time-consuming and...
-
Which of the following best illustrates an error caused by sampling? a. A randomly chosen sample may not be representative of the population as a whole on the characteristic of interest. b. An...
-
A CPA s audit report on a client s balance sheet, income statement, and statement of cash flows was sent to the stockholders. The client now wishes to present only the balance sheet along with an...
-
On August 5, 2016, you purchased a $10,000 (i.e., face value) T-note that matures on May 15, 2024. The coupon rate on the T-note is 6.875% and the price quoted on the bond in the financial press o...
-
(a) As Section 17.3 discusses, high-frequency sound waves exhibit less diffraction than low-frequency sound waves do. However, even high-frequency sound waves exhibit much more diffraction under...
-
Define assurance services. Discuss why the definition focuses on decision making and information.
-
Using an Internet search engine, find the web page on PrimePlus services created by the AICPA. On the website, find the PrimePlus / ElderCare glossary. Required: Describe the funeral rule defined in...
-
Why would a company institute a control policy that required mandatory vacations?
-
Ganados Phases. What are the main phases that Ganado passed through as it evolved into a truly global firm? What are the advantages and disadvantages of each?
-
Why Go. Why do firms become multinational?
-
Financial Globalization. Explain the twin agency problems. How do the twin agency problems limit financial globalization?
Study smarter with the SolutionInn App