70 360 is 13 mt
TRANSCRIPT
-
8/10/2019 70 360 IS 13 MT
1/8
University of Windsor
Odette School of Business
70-360-91
Prof. Ji Stevens
!id "er #$%in%tion
July &' (013
Instructions: 1. The use of point form in answering questions is encouraged
completed sentences and paragraphs are not required.2. Please ensure that your name appears in each answer file
submitted.3. ompleted answers are to be sent to the Instructor
!ste"en#$uwindsor.ca% attached to an email by 1&:&& pm'(riday' )uly *' 2&13. +nswers emailed after this time may
ha"e mar,s deducted for late submission.
-. /am totals 0* mar,s in the fi"e questions.
1
mailto:[email protected]:[email protected] -
8/10/2019 70 360 IS 13 MT
2/8
)uestion 1 (0 %r*s
e ha"e discussed the requirements of professional ethics as set out for public accountants by
organi#ations such as the International thics tandards oard for +ccountants and also the otherpronouncements !standards% to ensure quality in the completion of assurance engagements.
Required:
5 marks (a) list the individual basic principles included in the code of ethics.
5 marks (b) for each of the principles, listed in part (a), briefly explain what the
principle requires of the professional accountant or what is
involved in meeting the requirements of that specific principle.
5 marks (c) list the common threats to independence.
2 marks (d) if an auditor finds a significant problem or concern in meeting the
requirements for any one or more of the ethical principles required
in determining whether to accept or continue an
engagement, what options does the auditor have available to deal with such
problems.
3 marks (e) list the pronouncements that control quality of audits and the order that
they are considered and applied.
)uestion ( & %r*s
+uditors are required to complete certain preliminary !preplanning% engagement acti"ities before
a current audit is started.
4ist these required acti"ities.
)uestion 3 1( %r*s
There are a number of different opinions that the auditor may report in the auditors report based
upon the results of the audit. The first of these is the unmodified or unqualified opinion.
e ha"e discussed a number of different non standard !modified% auditors5 reports that are
discussed in + 0&* among other places.
Required:
4 marks (a) list the types of non standard auditors reports that we have discussed
2 marks (b) CAS 705 and the professional literature outlines two distinct types ofproblems that result in non standard auditors reports what are
they?
6 marks (c) materiality of the problem will determine the type of the report that can
reported list three different levels of materiality in reporting that
we have discussed and for each indicate the type of report that will result
2
-
8/10/2019 70 360 IS 13 MT
3/8
)uestion + 1, %r*s
In planning an audit, auditors in Canada may compute in the planning stage three different types
of materiality.
3 marks (a) define materiality within the context of a current Canadian audit of a set
of financial statements
3 marks (b) what are the three different types of materiality (using the current
Canadian terminology we have reviewed)?
4 marks (c) as the audit progresses, the auditor reviews audit differences discovered
and considers those differences with reference to planning
materiality. What are the options available to the auditor if it appears
that audit differences may exceed planning materiality?
8 marks (d) using the prior years financial statements for Testco that follow on pages
4 and 5, and the guidelines set out below, compute planning
materiality for 2010 using the assumption that the current audit now
being planned will have similar financial statement numbers as per the
most recently completed fiscal year.
uidelines for !%teri%lity %lcul%tions
6 3 to 07 of income before ta/ is generally recogni#ed as ha"ing thegreatest significance to financial statement users.
6 +lso consider:
8 Total +ssets 6 1 to 379
8 hareholders5 quity 6 3 to *7
8 e"enue !net sales% 6 1 to 37
3
-
8/10/2019 70 360 IS 13 MT
4/8
TESTCO INC.
Balance Sheet
(Unaudited)
December 31, 2009, with comparative figures for 2008
2009 2008
Assets
Current assets:
Cash $ 100 $ 9,100
Accounts receivable 520,000 201,000
Inventory, at cost 184,000 165,000
Prepaid expenses and deposits 6,200 4,000
710,300 379,100
Property, plant and equipment:
Property, plant and equipment 197,000 146,000Less accumulated amortization 39,000 6,000
158,000 140,000
$ 868,300 $ 519,100
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 289,200 $ 407,000
Corporate income taxes payable 78,800 6,000
Dividends payable 20,000 -
388,000 413,000
Long-term debt:
Long-term note payable 100,000 -
Shareholders' equity:
Share capital 6,000 3,000
Retained earnings 374,300 103,100
380,300 106,100
$ 868,300 $ 519,100
-
-
8/10/2019 70 360 IS 13 MT
5/8
TESTCO INC.
Income Statement
(Unaudited)
Year ended December 31, 2009, with comparative figures for 2008
2009 2008
Net sales $ 2,015,000 $1,250,000
Cost of goods sold 1,290,000 885,000
Gross profit 725,000 365,000
Other revenue:
Interest income 10,000 5,000
Expenses:Selling expenses 86,000 108,000
General and administrative 246,000 205,000
Amortization expense 33,000 30,000
365,000 343,000
Income before income taxes 370,000 27,000
Income taxes:
Current 78,800 6,000
Net income $ 291,200 $ 21,000
*
-
8/10/2019 70 360 IS 13 MT
6/8
)uestion & (0 %r*s
elect the one most appropriate answer for each multiple choice question. ;nly correct answers
are graded no mar,s are deducted for wrong answers. If more than one answer is recorded' that
question will not be graded. +ll parts are worth the same 2 mar,s.
The preferred submission of answers is a "ertical listing of question numbers 1 to 1& and the
letter of the selected answer immediately to the right of each question number.
1. hich of the following statements is not true