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In this discussion I would like you to answer this question:what have you found in the course so far that either surprised youor enlightened you about governmental accounting? Now that you knowa little about their structure, what are you most concerned aboutwhen looking at a financial report for your town, state, schoolboard or other governmental organizations?

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Jarrod Robel
Jarrod RobelLv2
29 Sep 2019

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The General Accounting Office prepared a report showing thatmany publicly-owned companies restated their financial statementsduring the period 1997 to 2001. Of course, they did not includehappenings such as the situation reported in The Wall StreetJournal, which told its readers that Qwest Communications (whichowns one of the Bell telephone companies) had restated its priorfinancial statements four times from July 2002 to February2003.

Assume that on one of the Sunday television news programs,whether Sunday morning as in Meet the Press or Sunday evening suchas 20/20, an accounting professor was being interviewed. "Hello,professor. Tell our viewers a little about yourself." "I amProfessor Blahblah. I am a certified public accountant, I amlicensed to practice as a certified public accountant, I have anearned doctorate in accounting, and I presently teach auditing atthe university level. Sometimes the department also has me teach acourse in accounting information systems, which I teach as a way ofdesigning accounting systems to provide information to decisionmakers." "What do you think of this situation of Qwest restatingits financial statements four times in seven months?" "Oh, this isterrible. The management of Qwest had a duty to file auditedfinancial statements with the SEC, and to provide those auditedfinancial statements to each of the company's stockholders.Naturally, those financial statements were required to be truthful.The accounting firm which audited those financial statements had aduty to design its audit to assure itself that those financialstatements were free of material misstatement, whatever the cause.If Qwest restated its financial statements four times in sevenmonths, then as they say in law, res ipso loquitur, which means'the thing speaks for itself.'" In other words, the very fact thatthe company restated its financial statements four times in sevenmonths, and by material amounts each time, suggests that neithermanagement nor the auditors did what they were obligated todo."

"Thank you, Professor Blahblah. Do you think our millions ofviewers should know anything else?"

"Yes, I do. If management was making decisions based on thosewrong numbers, then management probably made some bad decisionswhich they would not have made if they would have used correctnumbers."

"Thank you very much, Professor Blahblah. Let's hope that noneof our millions of viewers was among the people who sufferedfinancially as a result of what management and the auditors did orfailed to do."

Required:

1. Does the audit firm which gave clean opinions on thoseoriginal sets of financial statements have any obligation to doanything now about those earlier audit reports? Cite theauthoritative professional literature.

2. Design an audit program for asserted and unasserted claimsagainst this client company. Cite the authoritative professionalliterature related to the claims, and show how your audit programfulfills your professional responsibilities.

Thanks

The company the team chose is Alphabet formally Google, and competitor is Yahoo

You are a senior manager for the highly successful regional CPA firm of Fine, Dee, Evah, Dense, LLP (Fine). Since its inception nearly 30 years ago, Fine's audit practice has exclusively consisted of auditing private and not-for-profit organizations. Recently, the partners have been considering an opportunity to audit a publically-traded company for the company your team has selected.

The primary reason Fine has not heretofore ventured into auditing public-traded companies is because of the potential risk and legal liability associated with auditing public companies. However, Fine has been a bit stagnant, business-wise, for the past few years, and some of the older and more risk adverse partners are beginning to retire. Consequently, the lure of the often-lucrative and prestigious opportunity to audit a public company has become to hard to resist, so the partners have decided to pursue the chance to audit this company.

On a beautiful early-september morning you are called into the senior partner's office and told you and your team have been selected to lead the first-ever effort to audit a public-traded company for Fine. You are honored, but also know auditing a public company is a bit more tricky and complicated than auditing private and not-for-profit organizations. Fortunately, the senior partner had considerable experience early in his career with another firm in auditing public companies and told you he would be with you all the way. Relieved, you asked him what he wanted you to do. He tossed you the most recent Form 10-K of the company you selected and gave you the following assignments:

Review and discuss the Form 10-K for the company you have selected.
Create a report that will have 4 Sections.

Section 1. Initial Risk Assessment

Hint: The business and risk information is usually found in the first part of the risks, do not simply restate what is in the Form 10-K. Think like a senior manager at a CPA firm-what accounts (cash, A/R, Inventory,etc.) might be the most potentially risky and Why? For example an airline might not have the same inventory considerations found with a retail outlet like Wal-Mart.

Describe the following issues:
Ethics and legal Issues

1. The ETHICS and sophistication of top management and cultures where the company operates.

2. Have there been significant auditing or accounting issues raised in the recent past?

3. Did they have disputes with their previous audit firm?
4. IS this company or industry particularly susceptible to lawsuits or other legal proceedings?

Evaluate the regulatory and compliance and requirements of this company.
1. The compliance requirements of this company.

2. is it subject to a high-level of governmental regulation?

3. Are employees unionized? Are they generally compliant with Sarbanes-Oxley and other regulatory rules?

Section 2. Analytical Procedures

Based on Table 8-1 Examples of Planning Analytical Procedures and the sections on Analytical Procedures, select three ratios ( current, ratio, Inventory turnover, debt to equity, return on assets). calculate these ratios for the most recent year and compare the results.

Write a 350 to 525 word analysis of your findings

Section 3. Materiality and Risk

The senior partner wants to confirm your understanding of key concept.
Summarize each concept 90 to 175 words each.

materiality
misstatement
audit risk
audit risk model
inherent risk.
relationship of risk to audit evidence

Writing Assignment Intermediate Accounting I F2016 CA4-4.(Income Reporting Items) Simpson Corp. is an entertainment firmthat derives approximately 30% of its income from the CasinoKnights Division, which manages gambling facilities. As auditor forSimpson Corp., you have recently overheard the following discussionbetween the controller and financial vice president. VicePresident: If we sell the Casino Knights Division, it seemsridiculous to segregate the results of the sale in the incomestatement. Separate categories tend to be absurd and confusing tothe stockholders. I believe that we should simply report the gainon the sale as other income or expense without detail.? Controller:Professional pronouncements would require that we report thisinformation separately in the income statement. If a sale of thistype is considered unusual and infrequent, it must be reported asan extraordinary item. Vice President: What about the walkout wehad last month when employees were upset about their commissionincome? Would this situation not also be an extraordinary item?Controller: I am not sure whether this item would be reported asextraordinary or not. Vice President: Oh well, it doesn't make anydifference because the net effect of all these items is immaterial,so no disclosure is necessary. Instructions (a) On the basis of theforegoing discussion, answer the following questions. Who iscorrect about handling the sale? What would be the correct incomestatement presentation for the sale of the Casino Knights Division?(b) How should the walkout by the employees be reported? (c) Whatdo you think about the vice president's observation on materiality?(d) What are the earnings per share implications of thesetopics?

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