To Bid or Not to Bid Imagine you work for an auditing firm. Your most recent task is to determine whether your firm should bid to perform a public company’s auditing services. Determine the fundamental kind of information you need to make an informed decision about whether to bid on the audit. Provide your rationale.
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The decision to bid to perform a public company's auditing services should not be taken lightly. In order to make the bid/no bid decision, there are a number of factors to consider to make an objective, rather than subjective decision. The auditing firm should determine whether conducting auditing services of the potential client would create any threats to compliance with the fundamental principles. Potential threats to integrity may be created from questionable issues associated with the client. Thus, before bidding, the firm should investigate the potential client, its owners and its business activities. The firm should study the audited financial statements of the previous years, which are available public records. Knowing the client's financial situation will help us anticipate the types of frauds and misstatement we might discover. If the client goes out of business or files for bankruptcy after the audit, its creditors or investors might sue the audit firm, claiming that we should have foreseen the problems during the audit. Enquiring about the potential client is always accepted. Good sources include previous auditors, other professionals who deal with the company and federal regulators. Public company audit team consists of accountants and other professionals under the leadership of senior CPA. Before bidding, an auditing firm should ensure that it has met all the qualification criteria for conducting auditing services of a public company, whether it has required number of qualified personnel as well as an engagement team, whether it has the resources to conduct such audit as public companies require more audits because investment firms and individual investors have a financial stake in the company's financial returns. The auditing firm should also evaluate the audit risk. It refers to the risk that an auditor may issue an unqualified report due to the auditor's failure to detect material misstatement either due to error or fraud.
To Bid or Not to Bid Imagine you work for an auditing firm. Your most recent...
To Bid or Not to Bid Imagine you work for an auditing firm. Your most recent task is to determine whether your firm should bid to perform a public company’s auditing services. Determine the fundamental kind of information you need to make an informed decision about whether to bid on the audit. Provide your rationale.
a. You are the owner of ABC Auditing firm. A company comes to you and offers to hire you to perform an audit that was started by another company, who have been dismissed. What considerations would help to decide if you would accept the offer? b. What is a financial audit and what is an operational audit? How are these two types audits similar? How are they different? c. During an audit your discover that an employee embezzled $5 ten...
"Accounting Irregularities" Please respond to the following: Imagine that you were auditing accounts receivable balances to confirm sales and found significant discrepancies between the recorded account balances and returned confirmations from customers. Recommend an alternative approach to confirming sales revenue. Provide rationale for your recommendation. Using the case as a reference and from the e-Activity, discuss the improper recognition treatment you researched, and make a recommendation regarding the type of analytical procedure that should have detected the improper accounting transactions. Propose...
For each of the following independent situations, state whether the CPA has violated generally accepted auditing standards and/or the CPA Ontario Professional Code of Ethics. Explain your reasoning. (That is, violated/not violated and then explain why?) a. Emily, CPA, completed an audit of the financial statements of Major Breakthrough Inc. (MBI), a public company. During the audit, she became privy to information that MBI’s most recent major breakthrough was falsified and the information was going to made public in the...
Assume that the audit for National Australia Bank Limited (NAB), a financial institution, will be coming up for tender. You and your colleagues are required to prepare a client evaluation report based on your research for the senior members of your auditing firm. Your report should provide preliminary information as to whether the auditing firm should consider tendering for the audit of NAB. You should conduct extensive research and perform an analysis of the annual report of National Australia Bank...
Auditing Related Party Transactions ABSTRACT As part of the risk assessment of a client firm, auditors are required to evaluate the risks of material misstatement associated with related party transactions. Related party transactions may be evaluated at a higher risk of material misstatement as they may not occur under normal market settings or they may be motivated by an intent to perpetrate fraud. This case presents information about the related party transactions and other facts surrounding the audit of a...
imagine you are the consultant who has to make the recommendation on whether or not to purchase Anheuser-Busch. Determine the rate of return you could expect from your investment and the method you would use to evaluate the investment decision. Assess the disadvantages and advantages of each investment method located in Chapter 4, and choose the one that would provide the most accurate measure for your anticipated rate of return requirement. Justify your recommendation.
Auditing Related Party Transactions ABSTRACT As part of the risk assessment of a client firm, auditors are required to evaluate the risks of material misstatement associated with related party transactions. Related party transactions may be evaluated at a higher risk of material misstatement as they may not occur under normal market settings or they may be motivated by an intent to perpetrate fraud. This case presents information about the related party transactions and other facts surrounding the audit of a...
Assume that you are auditing Paradox, Inc., a manufacturer of hand-held personal digital assistants (PDAs). The following is information that you have extracted from the audit working papers. • The market for PDAs is very competitive with several companies battling for market share, which in turn has put downward pressure on profit margins. • Rapid advances in technology have further reduced the product life cycle. In the race to remain competitive a number of companies, including Paradox, have significantly increased...
imagine you are the consultant who has to make the recommendation on whether or not to purchase Anheuser-Busch. Determine the rate of return you could expect from your investment and the method you would use to evaluate the investment decision. Assess the disadvantages and advantages of each investment method located in Chapter 4,(net present value, IRR, capital budgeting by payback, and account rate of return) and choose the one that would provide the most accurate measure for your anticipated rate...