Lakeside Company, The: Case Studies in Auditing

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  • Edition: 10th
  • Format: Paperback
  • Copyright: 2005-01-01
  • Publisher: Prentice Hall
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The cases inThe Lakeside Companyare intended to create a realistic view of how an auditor organizes and conducts an audit examination. These cases provide a simulation that permits learners to put the abstract and difficult concepts of auditing into practice.Readers are guided through the various phases of an auditfrom planning the audit to reporting. The situations outlined in this book are not particularly unusual, but rather, the kinds of problems that an auditor might face each day on the job. The realistic audit activities include: analyzing fraud risk factors, performing analytical procedures, preparing internal control flowcharts and narratives, preparing and reviewing audit documents (working papers), preparing audit programs and applying audit procedures, and preparing audit reports.For individuals interested in taking a learning journey into the fields of auditing, accounting, and taxation.

Table of Contents

Overview: A Summary of the Cases and Supplements v
Introductory Case: A Look inside a CPA Firm 1(4)
Quality control standards
The engagement team
Advertising by professionals
Discussion questions
Apply your research
Analysis of a Potential Audit Client
Inquiries by a potential client
The question of expertise in an unfamiliar industry
Client dispute with incumbent auditors
Sizing up a potential client
Evaluating fraud risk factors
Discussion questions
Apply your research
New Clients and an Auditor's Legal Liability
Peer review and acceptance of clients
Analyzing potential legal liability
Contacting the predecessor auditor and reviewing working papers
The issue of materiality
Discussion questions
Apply your research
Audit Risk and Analytical Procedures
Engagement letters
Preliminary audit work
Audit risk model
Inherent risk
Control risk
Planned detection risk
Orientation to the industry and the client
Analytical review techniques
Price competition among CPA firms
Discussion questions
Apply your research
Assessing Control Risk
Assessing control risk
Preliminary evaluation of internal control
Documentation of internal control--flowcharts, narratives and internal control questionnaires
Discussion questions
Apply your research
Tests of Controls: The Revenue and Cash Receipts Cycle
Testing details of revenue and cash receipts transactions
Control testing questionnaire for accounts receivable
Confirmation of accounts receivable
The relationship between the adequacy of internal control and the amount of substantive tests to be performed
Discussion questions
Apply your research
Audit Procedures and Audit Documentation: Testing the Inventory Procurement System
Auditing the purchases and cash disbursements cycle
Broad management assertions
Elements and format of audit documents
Perpetual inventory system maintained by an outside service organization
Discussion questions
Apply your research
Designing Substantive Audit Tests: Compensation Plans
The payroll system
Auditing the employee compensation cycle
Profit-sharing arrangements
Reviewing a working paper
Discussion questions
Apply your research
Observation of Physical Inventory Count
Taking and observing inventory counts
Cut-off tests
Audit program for substantive tests of inventory
Discussion questions
Resolving Audit Problems
Warehouse expansion and renovation
Financing the expansion
Interest capitalization
Repairs and maintenance analysis
Leasing a store from a related party
Uncertainty regarding the continued existence of an owned store
Discussion questions
Apply your research
Sampling for Attributes
Selecting the attributes to test
Setting the acceptable risk of setting control risk too low and the tolerable exception rate
Determining the estimated population exception rate
Calculating the sample size
Evaluating the results of attributes sampling
Discussion questions
Apply your research
Sampling for Variables--Difference Estimation
Choosing the statistical method
Setting acceptable risk levels and tolerable misstatement
Estimating standard deviation
Calculating sample size
Evaluating sample results
Calculating precision interval
Discussion questions
Review of Subsequent Events
Subsequent events considered
Concluding the audit
Estimating liability for product warranty
Discussion questions
Apply your research
Consulting Services
Letter of recommendations to management
Internal control deficiencies
Proposal to update the computer-based accounting system
Discussion questions
Apply your research

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