External Auditing (AC 555)
Professor: Marie Wang
Project: You Decide- Smackey Dog Foods, Inc. by LJubomir Gataric
Questions:
Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
Solution:
The SEC assists in providing investors with reliable information upon which to make investment decision. The Securities Act of 1933 requires most companies planning to issue new securities to the public to submit a registration statement to the SEC for approval. The Securities Exchange Act of 1934 provides additional protection by requiring public companies and others to file detailed annual reports with the commission. Smackey Dog Food, need to file next forms:
Form S-1. “S” forms apply to the Securities…show more content… Tests of details of balances are specific procedures intended to test for monetary misstatements in the balances in the financial statements
Complete the Audit and Issue an Audit Report (Phase IV)
After the auditor has completed all procedures for each audit objective and for each financial statement account and related disclosures, it is necessary to combine the information obtained to reach an overall conclusion as to whether the financial statements are fairly presented. This highly subjective process relies heavily on the auditor’s professional judgment. When the audit is completed, the CPA must issue an audit report to accompany the client’s published financial statements.
Q4: Describe Keller CPAs’ responsibilities related to communications regarding internal control matters. What internal controls issues do you identify?
Solution:
1. Recorded transactions exist (occurrence).
2. Existing transactions are recorded (completeness)
3. Recorded transactions are correctly included in the master files and are correctly summarized (posting and summarization)
4. Recorded transactions are stated at the correct amounts (accuracy)
5. Transactions are correctly classified (classification)
6. Transactions are recorded on the correct dates (timing)
There are several internal control issues for Smackey Dog Food:
a. Lack of Internal Control
b. Segregation of Duties c. Lack of control on main production for the company
