Textbook Notes (368,789)
Canada (162,165)
Accounting (51)
ACCTG456 (8)
Chapter 2

Chapter 2 In class questions.pdf

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Trish Stringer

In Class # 2.1 Linda is the managing partner of a small CA audit firm. Linda’s role includes managing the business affairs of the firm, and she is very worried about the amount of fees outstanding from audit clients. One client, Dreamers Ltd. has not paid its audit fees for two years despite numerous discussions between Linda, the audit partner, Bill, and the management of Dreamers Ltd. Dreamers Ltd.’s management promised the fees would be paid before the audit report for this year was issued. Linda called Bill this morning to ensure that the audit report was not issued because Dreamers Ltd. had paid only 10 percent of the outstanding account. She discovers that Bill is about to sign the audit report. Required: Is there an ethical problem in this case? Explain In Class # 2.2 (a) Adnan is a CGA working for a large national audit firm. He is at his desk when he overhears his colleague Joan having a phone conversation. She is telling the person on the other end of the call that Gupta Co., the firm’s largest audit client is about to release the company’s audited annual financial statements and the results are spectacular. Joan says she just bought some shares as she expects that the share price will go up. (b) John Drake, a partner at Drake and Buetz, is meeting with a potential new client. The client recently saw the firm’s TV advertisement claiming that the firm was “the premier accounting firm in Western Canada.” The client requires a review engagement report with its financial statements to obtain a bank loan. John advises that his fee will be 10 percent of any bank loan granted. (c) Sue Chen, CA, is working on the audit engagement for Jones Construction, a reporting issuer (note: a reporting issuer is a public company with a market capitalization and a book value of total assets greater than $10 million). Jose, the accountant at Jones Construction, is unsure how to calculate the tax provision. Sue has advised Jose not to worry. She will prepare the tax provision and ensure that the disclosures are in accordance with generally accepted accounting principles (GAAP) so that she can issue a clean aud
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