a.
Concept Introduction: AICPA has issued a code of professional conduct which helps the auditors and AICPA members in the performance of their professional duties. This list contains codified statements that can guide auditors in maintaining their professional and ethical conduct.
The principle or rule violated in the given scenario.
b.
Concept Introduction: AICPA has issued code of professional conduct which helps the auditors and AICPA members in the performance of their professional duties. This list contains codified statements that can guide auditors in maintaining their professional and ethical conduct.
The principle or rule violated in the given scenario.
c.
Concept Introduction: AICPA has issued code of professional conduct which helps the auditors and AICPA members in the performance of their professional duties. This list contains codified statements that can guide auditors in maintaining their professional and ethical conduct.
The principle or rule violated in the given scenario.
d.
Concept Introduction: AICPA has issued code of professional conduct which helps the auditors and AICPA members in the performance of their professional duties. This list contains codified statements that can guide auditors in maintaining their professional and ethical conduct.
The principle or rule violated in the given scenario.
e.
Concept Introduction: AICPA has issued code of professional conduct which helps the auditors and AICPA members in the performance of their professional duties. This list contains codified statements that can guide auditors in maintaining their professional and ethical conduct.
The principle or rule violated in the given scenario.
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Chapter 1 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
- Read the following cases. Required: For each case, select whether the action or situation shows a violation of the AICPA Code of Professional Conduct, and select the relevant rule. a. CPA Jerry Cheese became the new auditor for Python Insurance Company. Cheese knew a great deal about insurance accounting but had never conducted an audit of an insurance company. Consequently, Cheese hired CPA Tate Gilliam, who had six years of experience with the State Department of Insurance Audit. Gilliam managed the audit, and Cheese was the partner in charge. b. CPA Mackenzie Palin practices public accounting and is a director of Comedy Company. Palin's firm performs consulting and tax services for Comedy. Palin prepared unaudited financial statements on Comedy's letterhead and submitted them to First National Bank in support of a loan application. Palin's accounting firm received a fee for this service. c. CPA Ellery Idle audited the financial statements of Monty Corporation and gave an unmodified…arrow_forwardFeller, the sole owner of a small hardware business, has been told that the business should have its financial statements audited by an independent CPA. Feller, having some bookkeeping experience, has personally prepared the company’s financial statements and does not understand why such statements should be audited by a CPA. Feller discussed the matter with Farber, a CPA, and asked Farber to explain why an audit is considered important. a. Describe the objectives of an independent audit b. Identify five ways in which an independent audit may be beneficial to Fellerarrow_forwardFor each of the situations described below, identify the category of threat to the fundamental principles of the SAICA Code of Professional Conduct. Additionally, specify at least one fundamental principle that is compromised in each situation. a) An auditor has shares in a company which is an audit client of theirs. b) An accountant has compiled the financial statements for a client and was requested to also audit the statements. c) The financial director of Baboo Ltd is very aggressive and dismissive of the audit function and audit team. d) A chartered accountant values a client's shares and then leads the negotiations on the sale of the client's company. e) The chartered accountant fails to report a fraud at a client because the perpetrator is a close friend and he is sympathetic to the interest of his friendarrow_forward
- Nakamura, CPA. has accepted an engagement to audit the financial statements of Grant Manufacturing Company, a new client. Grant has an adequate control environment and a reasonable segregation of duties. Nakamura is about to set the control risk for the assertions related to Grant's property and equipment. Required: Describe the key internal controls that should be in place related to Grant's property, equipment, and related transactions (additions, transfers, major maintenance and repairs, retirements, and dispositions) that Nakamura may consider in setting the control risk.arrow_forwardAssume that a CPA serves as an audit client’s business consultant and performs each of the following services for the client. Identify the threats to independence. Do you believe any safeguards can be employed to reduce the threat to an acceptable level? Explain.a. Advising on how to structure its business transactions to obtain specific accounting treatment under GAAP.b.Advising and directing the client in the accounting treatment that the client employed for numerous complex accounting, apart from its audit of the client’s financial statements.c. Selecting the audit client’s most senior accounting personnel by directly interviewing applicants for those positions.arrow_forwardField, CPA, is auditing the financial statements of MillerMailorder, Inc. (MMI). Field has compiled a list of possible inherentand fraud risks in the revenue cycle that may result in the misstatementof MMI’s financial statements and a corresponding list ofinternal controls, which, if properly designed and implemented,could assist MMI in preventing or detecting material misstatements.For each risk numbered 1 through 15 in column 1, select one internalcontrol from column 2 (labeled a. through t.), which, if properlydesigned and implemented, most likely could assist MMI in preventingor detecting material misstatements. Internal controls can beselected for more than one risk.arrow_forward
- Direction: Read the given cases. Then, identify the most applicable technique of gathering evidence ineach case. 1. Anna Santos audited the information system of Flores Corporation. Upon her evidence collection, she wanted to verify if the management assumes full responsibility for formulating, developing, documenting,promulgating, and controlling policies covering general aims and directives. 2. Veronica is the information systems (IS) auditor of Puno Corporation. In the execution of the audit, Veronica wants to know how the controls are established in the departments within the organization. Specifically, she wants to know how responsibilities are segregated in each department. 3. Brylle is one of the auditors of Alejandria Corporation (AC). He was assigned to test the controls over the cash of Alejandria. The accountant of AC prepares monthly bank reconciliation through the use of Microsoft Excel. Brylle wanted to know if the final amounts in the bank reconciliation are correctarrow_forwardAnna Santos audited the information system of Flores Corporation. Upon her evidence collection, she wanted to verify if the management assumes full responsibility for formulating, developing, documenting, promulgating, and controlling policies covering general aims and directivesarrow_forwardKroer & Sumner, CPAs performs a number of audits for its clients using GEnerally accepted Government Accounting Standards. As part of their GAGAS engagements, the firm often performs nonaudit services as defined by GAGAS. Which of the following is considered a nonaudit service under GAGAS and NOT a routine activity related to an audit? A) Providing advice to the audited entity on routine business matters B) Educating the audited entity on mantters within the technical expertise of the auditors C) Cash to accrual conversions D) Providing information to the audited entity that is reeadily available to the auditors, such as best practices ad benchmarking studiesarrow_forward
- North, CPA, is planning an independent audit of the financial statements of General Company. In determining the nature, timing, and extent of the audit procedures, North is considering General’s internal audit function, which is staffed by Tyler.Required:a. In what ways can the internal auditor’s work be relevant to North, the independent auditor?b. What factors should North consider, and what inquiries should North make in deciding whether to use Tyler’s internal audit work?arrow_forwardRead the given cases. Then, identify the most applicable technique of gathering evidence in each case. 1. Anna Santos audited the information system of Flores Corporation. Upon her evidence collection, she wanted to verify if the management assumes full responsibility for formulating, developing, documenting, promulgating, and controlling policies covering general aims and directives. 2. Veronica is the information systems (IS) auditor of Puno Corporation. In the execution of the audit, Veronica wants to know how the controls are established in the departments within the organization. Specifically, she wants to know how responsibilities are segregated in each department. 3. Brylle is one of the auditors of Alejandria Corporation (AC). He was assigned to test the controls over the cash of Alejandria. The accountant of AC prepares monthly bank reconciliation through the use of Microsoft Excel. Brylle wanted to know if the final amounts in the bank reconciliation are correct…arrow_forwardVictoria Lilly is a practicing CPA. A long-time audit client has asked Lilly to design and implement a computer-based accounting information system. The fees associated with this opportunity are very attractive. However, Victoria is concerned that she will not be able to maintain objectivity in future financial statement audits if she was responsible for the design and implementation of the client's accounting system. Furthermore, Victoria knows that professional standards require her to remain independent in "fact" and "appearance" from her auditing clients.1. In regards to financial statement audits, what is the difference between independence in "fact" and independence in "appearance"?2. Why do professional standards require that an auditor remain independent of their audit clients?3. Do you believe that Victoria can accept the engagement to develop the client's accounting system and still remain independent? (Support your answer)arrow_forward
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- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College