Questions and Answers of Principles of Auditing

Brian Fox quickly "turned around" Powder River. In 2006, the company reported a net income of $5.7 million on revenues of $13.2 million. The company's balance sheet for that year reported nearly $25
In 1984, Scott London graduated with an accounting degree. He accepted an entry-level audit position with the Los Angeles office of Peat Marwick, the U.S. predecessor of KPMG that was formed three
Like most high school graduates, Michael Dell had a sense of anticipation, if not exhilaration, when he left home to begin his college career. Because Dell planned to become a doctor, like his
Say that you infect your computer with the virus du jour after downloading a YouTube video that had been trending on your favorite social media site. What do you do? Many low-tech mouse potatoes
Antoine Deltour faced a difficult decision in the summer of 2008. Deltour was searching for a job after having completed a master's degree in business with a concentration in accounting from Ecole
Andrea Jung earned a degree in English literature from Princeton in 1979. Before pursuing a law degree, the 20-year-old Jung decided to take a short break from academics to gain some real-world
Wiley Jackson spent three months as an audit intern with a local practice office of a major accounting firm while he was earning an undergraduate accounting degree at the University of
"The final undergraduate award today is the William J. Upchurch Medal, which is given annually to the outstanding senior in the Hopkins College of Business.Nominations are made by Hopkins faculty
The surging demand for petroleum products in recent decades has produced a windfall of revenues for many oil-rich Islamic countries in the Middle East, including, among others, Kuwait, Saudi Arabia,
Fifteen minutes before the first meeting of Professor Noah DeBerry's graduate auditing seminar, he sat down at his desktop computer to retrieve the photo roster for the three-hour evening course.1
Michael Woodford became the first foreign-born chief executive of a Nikkei 2252 firm when he was appointed Olympus's CEO. Being selected as Olympus's CEO was the culmination of the British citizen's
Financial crime is a growth industry worldwide. The U.S. Department of the Treasury estimates that the proceeds from extortion, healthcare fraud, identity theft, insider trading, the trafficking of
The Horn of Africa has long played an important role in world history. Most historians believe that the large triangular peninsula that juts into the Indian Ocean along the east coast of Africa was
The black Toyota minivan made slow but steady progress down the narrow, unpaved road as it approached the village of Takhli in south-central Thailand, approximately 150 miles north of Bangkok. On
In 1956, the Republic of the Sudan obtained its independence from Great Britain. Although unified, Sudan was effectively two countries within one. Northern Sudan, home of the nation's capital,
The rapidly expanding Chinese economy has captured the attention of investors worldwide over the past two decades. Companies such as Longtop sought to capitalize on the growing interest in the
"Olivia, I would like you to meet Eli Arezzo." "Hey, no need to introduce us, Luke. We are old pals. Right, Eli?' "Oh yeah, we go way back!" Olivia and Eli shared a laugh at the expense of Luke
Two days after the Miss USA pageant aired in June 2012 on NBC, one of the losing contestants claimed in a Facebook post that the pageant's outcome had been "rigged." That allegation cast doubt on the
Frank Coleman pounded away at his calculator as he tried in vain to reconcile his number for the LIFO reserve to the figure recorded by the client.1 Frustrated and fatigued, Frank glanced at his
In the mid-1990s, KPMG Peat Marwick audited a small, Dallas-based drugstore chain, Texas Drug Warehouse (TDW). Before beginning the company's 1995 audit, KPMG "made a business decision to reduce the
Ladislas Nay immigrated to the United States from Hungary in 1921 at the age of 18. The opportunities offered by his new land excited the industrious young immigrant, and he promised himself that he
In the business world of the Roaring Twenties, the schemes and scams of flim-flam artists and confidence men were legendary. The absence of a strong regulatory system at the federal level to police
Historians disagree when the first email message caromed down the information superhighway, but there is no dispute that email was the Internet's first "killer app." Email quickly became the primary
Two congressional investigations in the 1970s provided for the first time revealing insights into the internal operations of the eight major accounting firms that had dominated the U.S. accounting
Sarah Russell grew up in a small town in the flatlands of western Kansas where she was born.1 In high school, she was homecoming queen, valedictorian of her graduating class, point guard on her
In the summer of 2002, the U.S. Congress hurriedly passed the Sarbanes-Oxley Act (SOX). The SOX legislation contained the most far-reaching financial reporting reforms at the federal level since the
"No, that's okay, Bea. I'll write that memo this weekend and send it to Mr. Fielder. You go on home."1"Are you sure, Chuck? I don't mind staying a while longer.""Thanks, Bea, but you've already put
"Oh no, not Store 51," Avis Love moaned under her breath. For the third time, Avis compared the dates listed in the cash receipts journal with the corresponding dates on the bank deposit slips. Avis
It was late May, just two weeks before Tommy would be leaving for Amarillo to begin the Altamesa audit-the company had a June 30 fiscal year-end. Tommy, Jack Morrison, and an audit manager were
After spending much of the previous three months working elbow-to-elbow with as many as six colleagues in a cramped and poorly ventilated conference room, Hamilton Wong was looking forward to moving
Bill, will you have that inventory memo done by this afternoon?" "Yeah, Sam, it's coming along. I should have it done by five, or so." "Make it three . . . or so. Okay, Bub?" Bill responded with a
Leigh Ann Walker graduated from a major state university with a bachelor's degree in accounting.1 During her college career, Walker earned a 3.9 grade point average and participated in several
The busy season that was winding down had been notable for Madison because it was her first as an audit manager for her employer, a large practice office of a Big Four accounting firm. Her promotion
"So, any good news on the staffing front, Till?" Sophie White Eagle asked in between bites of a Christmas cookie. "Nope. Still short at least one staff accountant," Tillman Rollins replied glumly
"Come on, Brian. You don't mean that.""I meant every word of it, Elise. Here, let me repeat it for you: My career will be a total failure if I don't make audit partner. A complete bust, an absolute
After answering her cell phone, Kayleigh Caudell cradled it between her right ear and shoulder as she continued to scroll through a large electronic file searching for a client document.
Richard Grimes glanced at his wristwatch as he pulled into the nearly deserted parking lot of the corporate headquarters of McCaleb Medical Corporation (MMC).1 It was 6:25 a.m. on a cold and overcast
By 2010, Ernst & Young (EY; E&Y) had served as the independent audit firm for Universal American Corporation for 15 years. Universal, a large healthcare services company headquartered in
In late 2003, Le-Nature's Inc., a Pennsylvania-based beverage company, selected BDO Seidman to replace Ernst & Young (EY) as its independent audit firm.1 A few months earlier, EY had insisted
On April 11, 2017, KPMG LLP announced that five partners and one employee of the firm had been dismissed for failing to disclose confidential information obtained illicitly from the Public Company
In the early 1930s, the Great Depression forced engineering student William Harrah to drop out of UCLA. Known as a "hustler" by his friends, Harrah began operating a bingo parlor to support himself.
Cornelius Vander Starr wanted to see the world. In 1918, the 26-year-old Californian emptied his bank account to purchase a one-way ticket to the Far East on a steamship.After "bumming around" Japan
A former Merrill Lynch executive organized IPOC in 2000 after the Bermuda government issued a license to the company to operate as a mutual fund. Three years later, after Bermuda regulatory
Cash shortages had been a recurring problem for Blakely's Fourth Street store. Over the previous 12 months, Martin Carrington had reported four shortages, each exceeding $200, to Thomas Blakely, the
Walmart's incredible growth was due to the hypercompetitive business model developed by Sam Walton. The central tenet of Walton's business plan was the motto that he adopted for his company, "The
Neumann and Tides quickly found that their new work roles were tension-packed. The source of the tension was management's concern that Deloitte, which at the time was completing its 2006 audit of
In late 1993, Joseph Fierro accepted a part-time sales position with a Saks Fifth Avenue store in New York City.1 Fierro was assigned to the Men's Polo Department of that store, a department
Michael Barnes, Buranello's general manager, was just as frustrated by the cash shortages as his boss, Marta Giordano. Barnes had worked at Buranello's for more than 20 years and was practically a
Woodrow Wilson Robinson and Albert Leroy Hunt lived and worked in Huntington, West Virginia, a city of 60,000 tucked in the westernmost corner of the state. The bluecollar city sits on the south bank
Hannah Van Dyke methodically flipped through the financial statement disclosure checklist searching for items underscored with a yellow highlighter by Jennifer Jones, the audit manager assigned to
"So, Dani, seriously, what exactly am I going to be doing today?""I am serious, Tyler. I'm not sure what I'm supposed to be doing much less what I'm supposed to have you do. Like I said . . . Katelyn
Aaron Elrod spent the early years of his professional career in a large Sun Belt city working on the staff of a major accounting firm and then serving as an assistant controller for a municipal
Suzette Washington financed her college education by working as an inventory clerk for Bertolini's, a clothing store chain located in the southeastern United States.1 Bertolini's caters primarily to
Jon Fries orchestrated a large-scale financial fraud that led to the downfall of F&C International. At least 10 other F&C executives actively participated in the scam or allowed it to
Imagine this scenario. A few years after graduating from Boston College, Florida Gulf Coast University, or the University of North Texas with an accounting degree, you find yourself working as an
In 1899, Cator and Guy Woodford established a new business, the Retail Credit Company, in downtown Atlanta. The two brothers realized that local grocery stores suffered large losses each year because
Before entering the business world, Patrick Byrne, the son of a wealthy associate of Warren Buffett, lived the life of a bon vivant and Renaissance man. After spending time as a student in China,
LocatePlus had two principal revenue streams. Slightly more than one-half of the company's annual revenue was generated by selling direct, one-time access to its large database. The company's other
Bankrate's management organized the company into three operating divisions: Core, Insurance, and Credit Cards. The Core division housed the company's original operations that provided mortgage
As David Robinson works his way through the large, festive crowd, he keeps bumping into people he knows. All the while, Robinson is hoping that he will avoid the one person he doesn't want to meet
Castello instructed several of his subordinates to misrepresent CBI's reported operating results and financial condition for the fiscal years ended April 30, 1992, and 1993.1 Those misrepresentations
During the 1990s, Kenneth Lipper emerged as a leader of the rapidly growing hedge fund "industry" in the United States. Born in 1941, Lipper, the son of a shoe salesman, spent his childhood in a
Grand Theft Auto ranks among the best-selling video games of all time as well as one of the most controversial.1 By the time Grand Theft Auto V was released in 2013, over 125 million copies of the
Jack Nicklaus began playing golf as a young boy and had mastered the game by his mid-teens. After graduating from high school, the golf prodigy accepted a scholarship to play collegiately for Ohio
Similar to many companies, GM was victimized by the economic crisis triggered in late 2008 by collapsing housing prices and the implosion of the subprime sector of the mortgage industry. That crisis
Orecchio and Oliver agreed to be equal partners in AA Capital. Orecchio assumed the titles of president and secretary for the new firm, while Oliver took the titles of chairman and treasurer. Because
The Brothers Greenberg For decades, Jack Greenberg oversaw a successful wholesale meat company, a company that he eventually incorporated and named after himself.1 Jack Greenberg, Inc., marketed a
The entertainment industry had fascinated Garth Drabinsky from an early age. Unlike many of his colleagues in the industry, Drabinsky did not benefit from a network of family members and friends in
Nearly one-half of recent mortgage foreclosure victims obtained their loans from socalled subprime lenders that became dominant forces within the mortgage industry during the past two decades. The
Madoff's brokerage firm initially traded only securities of small over-the-counter companies, securities commonly referred to as "penny stocks." At the time, the securities of most large companies
Discipline, honesty, and a strong work ethic were three key traits that John and Mary Andersen instilled in their son. The Andersens also constantly impressed upon him the importance of obtaining an
Clifford Hotte had a problem. His company had come up short of its earnings target. For the fiscal year ended April 30, 1995, financial analysts had projected that Health Management, Inc. (HMI), a
In 1998, Bernard Duroc-Danner merged his oilfield equipment company with Weatherford Services to create Houston-based Weatherford International. The native of France had emigrated to the United
Caterpillar traces its roots to the early 1900s when Benjamin Holt invented a slowmoving but functional tractor-previous efforts at developing tractors for agricultural use had produced bulky
Henry Wells, William Fargo, and their partners decided the two business services most needed by San Franciscans were transportation and banking. After acquiring a building near the intersection of
Thursday, October 24, 1929, easily ranks as the most dramatic day that Wall Street has ever seen.1 That day witnessed the beginning of the Great Stock Market Crash that over the following few years
Che-Chuen Yuen was born in 1948 in Shanghai during the bloody civil war that rocked China following the conclusion of World War II. After the Chinese civil war ended in 1949, Mao Zedong, the leader
In late 2005, Deloitte's Navistar audit for the fiscal year ending October 31, 2005, was nearing completion when the audit engagement partner took a "mysterious medical leave"2 and was replaced.
Podlucky served as Le-Nature's chief executive officer (CEO) and relied principally on his family and wide circle of friends and business associates to staff the company's other key positions as it
At approximately the same time that Thomas Shine was launching his business career in the retail industry in the United States, Harold Ruttenberg was doing the same in South Africa. Ruttenberg, a
Publicly traded companies are required to make certain disclosures in their annual reports about the compensation paid to their top executives. One reason for this is to help interested stakeholders
a. Evaluate the effectiveness of CTI’s control environment. b. Assess risk at the financial statement level. 1. Evaluate inherent risk at the financial statement level. 2. Evaluate the risk of
Given the information you have collected above about internal controls in the purchases process:a. Evaluation: Evaluate the quality of internal controls for each assertion related to purchase
In this chapter, the history of auditing has been briefly described from an international perspective. Identify the major differences with the developments specific for your country and try to
At IFAC/International auditing and Assurance Standard Board’s publication website h tp: /www.ifac.org/auditing-assurance/publications-resources find and download the latest Handbook of
Describe two treats and related safeguards associated with each of the following independence activities (Code Section):A. Documentation of Independence (290.29)B. Engagement period (290.30)C.
What importance would internal controls have for an audit firm?
Using the references in footnotes to this chapter as a beginning place and accessing journal databases such as ABI Inform, discuss the theoretical view that the review process consists of four
Should a corporate governance code be developed by governmental bodies and enforced by law or should a code be developed by private institutions as companies, shareholder representatives, lawyers and
Describe the system of oversight of the audit profession in your country. Compare this system with the PCAOB standards. Discuss differences. US students should analyse the oversight system in the UK
In your role as shareholder, check the compliance of your portfolio firm with a (randomly) select a Corporate Governance Code from www.ecgi.org. Report your findings and conclusions in a formal
Accounting policies and practices that are most important to the portrayal of the company’s financial condition and results, and require management’s most difficult, subjective, or complex
Which of the following is an example of a subsequent event?a. A bond issuance after the balance sheet date but prior to issuance of the financial statements.b. A cybersecurity attack that occurred
When auditing a fixed asset account such as land, buildings, and equipment, the auditor will normally:a. Vouch the book value of fixed assets to underlying purchase documents.b. Place the greatest
The internal document commonly used to record a credit purchase in the purchases journal is a:a. Purchase requisition.b. Purchase order.c. Vendor’s invoice.d. Voucher.
Compare and contrast a compilation engagement and review engagement.
If auditors identify only one material weakness in a client’s internal control system, the appropriate report to issue is a(n):a. Qualified opinion.b. Adverse opinion.c. Disclaimer of opinion.d.
a. Conclusions: Based on the new information and assuming management cooperates with your recommended course of action, how would you date your updated report and would your updated report be an
All of the following are examples of a change in accounting principle except:a. A change from one acceptable accounting principle to another acceptable accounting principle.b. A change in an
In what circumstances is an auditor required or allowed to include an emphasis-of-matter paragraph in the audit report on the financial statements?

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