Smackey Foods

Topics: Auditing, Balance sheet, Audit Pages: 7 (2014 words) Published: November 7, 2010
Worksheet for You Decide

Name _Sonia Godoy______ Course Code _________Grade ___/Date__/__/__

Q1:Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution:
The SEC was created to help investors get reliable information about the company they are investing in. 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. The SEC follows the GAAP’s reporting requirement for financial statements. As for Smackey Dog Food they are a privately own company and the 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:

The initial planning of an audit involves the following:
1. The auditor decides whether to accept a new client or continue serving an existing one. This determination is typically made by an experienced auditor who is in a position to make a important decisions. The auditor wants to make this decision early, before incurring any significant cost that cannot be recovered. With Smackey Dog Food, Keller CPA had time to devote to the audit and therefore accepted the job. 2. The auditor identifies why the client wants or needs an audit. This information is likely to affect the remaining parts of the planningprocess. Smackey needs an audit because they are trying to get a loan from the bank to expand their operations. 3. To avoid misunderstandings, the auditor obtains an understanding with the client about the terms of the engagement. With Smackey Dog Food, the auditors sent over the audit staffers to assess the client and plan the audit. 4. The auditor develops an overall strategy for the audit, including engagement staffing and any required audit specialist.

Q3:Discuss the 4 stages of the audit and the major activities performed by the auditor in each phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each. Solution:

The four stages of the audit are:
1-Planning: during this stage the auditor gains understanding of the clients business and industry which helps access acceptable audit risk, client business risk and the risk of misstatements in the financial statements. For example the audit manager Pete and two audit staffers , Ben and Maureen have gone to smackey to start the planning of the audit. Further more there are more parts to the audit planning stage, it helps us set materiality and acceptable audit risk and inherit risk. Understand internal controls and asses control risk.

Gather information to asses control risk
Develop an overall audit plan and audit program.
2- Field work Fieldwork is the process of gathering evidence and analyzing and evaluating that evidence as identified in the Planning Survey & Research process The purpose of fieldwork is to accumulate sufficient, competent, relevant, and useful evidence to reach a conclusion concerning our performance expectations, and to support our audit comments and recommendations. Audit evidence is sufficient when it is factual and would convince an informed person to reach the same conclusion. Evidence is competent if it consistently produces the same outcomes. It is relevant when it is directly related to the audit comments, recommendations, and conclusions. 3- Reporting

4- Follow up

Q4:Describe Keller CPAs’ responsibilities related to communications regarding internal control matters. What internal controls issues do you identify? Solution:
The internal control issues are that smackey does’t have a system into place for the waste of food, also our staff auditors have discover that tone of...
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