Below are five short fact patterns. Please answer the questions to each. 1.A CPA is auditing...

 

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Below are five short fact patterns. Please answer the questions to each. 1.A CPA is auditing the Atlantis Diner in Astoria, Queens, NY which historically receives approximately 5% of its revenue in cash. The owner of the diner represents that the diner is a "going concern." However, in the last seven years, the company has had an annual net loss of between 2% and 3%. How should the auditor address this situation? 2. The CFO of a company conducts monthly Zoom meetings with comptrollers of each branch office. What are three acceptable tests that might be discussed with the comptrollers to assure the CFO that there are sufficient internal controls within each branch? 3. Sam and Dave are auditing XYZ Corp. In a post-audit analysis of audit data, they realize that the cash account is low, as compared to the relative level of sales for the year. In response, they run a number of tests that compare the working capital levels to sales over the last five years. Afterwards, they discuss this informally with the company CEO. The CEO assures them that this is not a problem. So they do nothing else. What do you think? 4. You are the newly appointed CFO of ABC Corp. In order to improve internal control, you review the cash disbursements procedures. You immediately realize that there is no formal system in place. You ask the CEO for permission to set up a voucher system. How would you organize such an arrangement? 5. You are the auditor of Pitter Corp. You have just completed the company audit, and issue the audit report on March 1, 2022 for the last calendar year. On March 15, 2022, the Chairman of Pitter Corp. calls you to tell you that he just signed a deal to sell the company to Pestlax Corp. How will this affect the audit? What must you do? Below are five short fact patterns. Please answer the questions to each. 1.A CPA is auditing the Atlantis Diner in Astoria, Queens, NY which historically receives approximately 5% of its revenue in cash. The owner of the diner represents that the diner is a "going concern." However, in the last seven years, the company has had an annual net loss of between 2% and 3%. How should the auditor address this situation? 2. The CFO of a company conducts monthly Zoom meetings with comptrollers of each branch office. What are three acceptable tests that might be discussed with the comptrollers to assure the CFO that there are sufficient internal controls within each branch? 3. Sam and Dave are auditing XYZ Corp. In a post-audit analysis of audit data, they realize that the cash account is low, as compared to the relative level of sales for the year. In response, they run a number of tests that compare the working capital levels to sales over the last five years. Afterwards, they discuss this informally with the company CEO. The CEO assures them that this is not a problem. So they do nothing else. What do you think? 4. You are the newly appointed CFO of ABC Corp. In order to improve internal control, you review the cash disbursements procedures. You immediately realize that there is no formal system in place. You ask the CEO for permission to set up a voucher system. How would you organize such an arrangement? 5. You are the auditor of Pitter Corp. You have just completed the company audit, and issue the audit report on March 1, 2022 for the last calendar year. On March 15, 2022, the Chairman of Pitter Corp. calls you to tell you that he just signed a deal to sell the company to Pestlax Corp. How will this affect the audit? What must you do?

Answer rating: 100% (QA)

Answer 1 The auditor should address this situation by discussing it with the owner of the diner and ... View the full answer