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ANSWER:
2.
3.
4.
10
5.
6.
7.
11
8.
meant by
audit
performance.
to support
11.
12
12.
13.
14.
15.
ANSWER:
16.
19.
18.
17.
13
14
20.
21.
22.
23.
15
ANSWER:
COMPLETION:
24.
25.
Through the
, the AICPA
has provided a framework for defining the acceptable quality
of independent audits and other services rendered by CPAs.
ANSWER:
26.
27.
and
CHARACTER, COMPETENCE
30.
QUALITY
29.
TEST BASED
28.
AUDIT
MATCHING:
ATTEST
function.
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31. Match each of the following actions with the Code of Conduct
rule violated by the action. No rule is used more than once.
Briefly explain why the action is a violation of the rule cited.
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
Rule
Rule
Rule
Rule
Rule
Rule
Rule
Rule
Rule
Rule
Rule
101:
102:
201:
202:
203:
301:
302:
501:
502:
503:
505:
Independence
Integrity and objectivity
General standards
Compliance with standards
Accounting principles
Confidential client information
Contingent fees
Acts discreditable
Advertising and other forms of solicitation
Commissions and referral fees
Form of practice and name
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f:
2.
a:
3.
c:
4.
g:
5.
d:
6.
b:
18
7.
e:
Problem/Essay
33. John Block, CPA, has been approached by a prospective new
audit client, Snappy Enterprises, Inc. Snappy had previously
been audited by another CPA. Before accepting the engagement,
Block discussed several matters with Snappys controller and
(with Snappys permission) the other CPA. As a result of these
discussions, the following information was obtained.
Incorporated in 1992, Snappys primary business is buying,
developing, selling, and leasing commercial real estate.
Apartment complexes, shopping malls, and industrial parks make up
the major portion of the companys business. Starting out in
Albuquerque, New Mexico and the surrounding area, Snappy
gradually expanded its operations to include most of southwestern
United States, including the Phoenix--Scottsdale--Mesa area of
Arizona.
After two years of losses, the company reported its first
earnings in 1994. From 1995 to 2000, revenues and earnings
increased dramatically. Earnings for 2001 and 2002, however
declined from earlier levels. For the current year, 2003,
unaudited net income has rebounded to the 2000 level.
Block has learned from discussions with Snappys controller
that, as of 12/31/03, the end of the current year, the company
was in the process of completing a major mall project. The
company currently owns several apartment complexes and leases its
completed shopping malls to numerous retail establishments.
After having been developed, industrial properties are sold
either to municipalities or to companies locating in the
complexes.
In discussing past audits with the CPA formerly engaged by
Snappy, Block learned that several disagreements had arisen over
the years, many of which had not been resolved to the
satisfaction of the former auditors. The disagreements related
to accounting matters as well as to the substance of certain
transactions with lessees.
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Required:
a.
In deciding whether to accept this engagement, what
factors should Block consider?
b.
If he decides to accept the engagement, in what areas
should he concentrate his audit resources?
SOLUTION:
a.
b.