Business / Smackey Dog Food

Smackey Dog Food

Autor:  huawei33  25 March 2012
Words: 3000   |   Pages: 12
Views: 1179

Smackey Dog Food

Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. (Smackey)

Solution 1:

The SEC does not have direct influence on privately held companies such as Smackey. It does, however, have considerable indirect influence in setting generally accepted accounting principles and disclosures requirements considered necessary for fair disclosures of investors in the United States. Specific to the case study, Keller CPA (Keller) must follow the six generally accepted audit standards established by the Auditing Standards Board (ASB) of the Accounting Institute of Certified Public Accountants which include general standards, standards of field work and standards of reporting.

Reference: Page 30-32

Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

Solution 2:

Keller’s purpose for audit planning is to gain an understanding of the client’s business and industry, which is used to assess acceptable audit risk, client business risk and the risk of material misstatements of financial statements. The four major parts of audit planning include: (1) setting materiality and assess acceptable audit risk and inherent risk; understanding internal control and assesses control risk; gathering information to assess fraud risk; and developing an overall audit plan and audit program. The sub-parts of accepting a client and initial planning of an audit should focus on the following:

• New client acceptance and continuance. Keller will need to assess Smackey as a new client against other engagements prior to incurring significant costs. The Senior Partner(s) will most likely compare any risks factors and costs/benefits of taking on Smackey based upon precursory information and rely upon their professional experience.

• Identify client reasons for audit. Keller knows that Smackey seeks an audit for additional debt financing, but...

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