Assignment: You are the audit senior in charge of field work for the 2017 audit of...

Assignment: You are the audit senior in charge of field work for the 2017 audit of Curl Up and Dye, Inc., a chain of women’s beauty parlors. Substantive tests reveal that CU&D’s Accounts Receivable account as of December 31, 2017 includes $184,900 due from officers. Minutes indicate that the Board of Directors approved those loans. A member of the audit committee gives you copies of the “demand notes” which appear to be properly signed and dated by the officers who borrowed from the company. You ask the CEO, an officer who owes approximately half of $184,900 due to the company, whether the company will require officers to repay these loans. He replies that officers might someday repay the loans, but it is possible that the Board of Directors will eventually forgive the loans as part of officers’ annual bonuses. $184,900 is a material amount for this audit.

1) What other questions, if any, would you ask for information, if any, would you like to obtain for the existence and valuation assertions?

2) What disclosure is necessary in the company’s financial statements, including notes to the financial statements? Search FASB Acccounting Standards Codification for required disclosure (See below for search method). Cite the Code section(s) that you think is (are) relevant.

3) What journal entry(ies), if any, would you propose?

Solutions

Expert Solution

Other Question on Existence Assertion is that all account balances exist for assets, liabilities, and equity.

Valuation Assertion- The assertion is that all asset, liability, and equity balances have been recorded at their proper valuations.

XXX-YY-50 Disclosure

Disclosure necessary in the company’s financial statements, including notes to the financial statementsThis Section may include references to general disclosure requirements that encompass the items addressed by the Subtopic.The Receivables Subtopic contains a link to the general financial instrument disclosure requirements that relate to receivables.This Section contains implementation guidance and illustrations, which are an integral part of the standards. The Codification separates implementation guidance and illustrations from the main body of the standards but provides references and links in both directions. This Section provides guidance relating to the standards in simplified and generalized situations.

Journal Entry

Loan A/cDr. 184900

To recievable Account 184900

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

You are an audit senior in charge of your first audit and are wrapping up your work....

You are an audit senior in charge of your first audit and are wrapping up your work. The client's controller, a pretty fussy person, knows you're going to ask for a "representation letter" near the end of the audit which he thinks adds an unnecessary burden on him because he's already overworked. He says he won't comply with your request until you explain why an auditor needs a representation letter for every audit.

Question 4 (9 marks) As audit senior in charge of the audit of Q Limited, you...

Question 4 As audit senior in charge of the audit of Q Limited, you have asked your audit staff to review the audit files and make a list of items for inclusion in the management representation letter. The staff have provided the following draft list of points: Liabilities All contingent liabilities have been discussed and appropriate disclosures made in respect of all known contingencies. All known subsequent events have been discussed and appropriately treated in the financial report. Property, Plant...

You have recently been appointed as senior-in-charge of the audit of SignsCo, a subsidiary of BillsCo....

You have recently been appointed as senior-in-charge of the audit of SignsCo, a subsidiary of BillsCo. The company must be externally audited. The company produces a wide selection of signs and signboards, ranging from small signs used on doors to large freestanding road signs. Traffic and road signs form the major portion of the company’s sales. SignsCo only supplies signs; it does not attach or erect them. Your firm has held the appointment of auditor for some years but you...

You work for a well-known regional CPA firm and are the senior auditor in charge of...

You work for a well-known regional CPA firm and are the senior auditor in charge of the fieldwork for a medium sized manufacturing company in the Chicago metro area. The company has been a client for over ten years and there have never been any concerns with the company's systems of controls or their accounting practices. Accordingly, RMM has been considered to be low and audits have been able to place reliance on tests of controls. The interim fieldwork included...

You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Auto Parts, Inc....

You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Auto Parts, Inc. Your newly hired staff assistant reports to you that she is unable to complete the four-column proof of cash for the month of April 20X0, which you instructed her to do as part of the consideration of internal control over cash. Your assistant shows you the working paper that she has prepared. Your review of your assistant’s work reveals that the dollar amounts of...

You are the senior auditor-in-charge of the July 31, 20X0, audit of Reliable Auto Parts, Inc....

You have completed the field work in connection with your audit of Alexander Corporation for the...

You have completed the field work in connection with your audit of Alexander Corporation for the year ended December 31, 2017. The balance sheet accounts at the beginning and end of the year are shown below. Dec. 31, 2017 Dec. 31, 2016 Increase or (Decrease) Cash $277,900 $298,000 ($20,100 ) Accounts receivable 469,424 353,000 116,424 Inventory 741,700 610,000 131,700 Prepaid expenses 12,000 8,000 4,000 Investment in subsidiary 110,500 0 110,500 Cash surrender value of life insurance 2,304 1,800 504 Machinery...

You are the audit senior responsible for the audit of SampsonLimited. You are currently planning...

You are the audit senior responsible for the audit of Sampson Limited. You are currently planning the audit for the year ended 31 December 20X7. During your initial planning meeting held with the financial controller, he told you of the following changes in the company’s operations. (i) Due to the financial controller’s workload, the company has employed a treasurer. The financial controller is excited about the appointment because in the two months that the treasurer has been with the company...

You are the audit senior at East & West and are conducting the audit of Relaxing...

You are the audit senior at East & West and are conducting the audit of Relaxing Pool Ltd for the year ended 30 June 2018. Relaxing Pool retails spa pools and has stores across Australia. The audit assistant, John Cummins, has carried out tests of controls over payroll. An extract from his audit working papers is as follows: The tolerable rate of deviation for this test, as per the audit plan, is 5 per cent. Twenty-four employee’s pays were selected...

The audit team completed the field work on 22 July 2020. The audit report was signed...

The audit team completed the field work on 22 July 2020. The audit report was signed on 5 August by Charles Kirby. The financial statements were signed by the BoD on the same day, which was subsequently released to shareholders on 12 August 2020. During the review of subsequent events, you noted the following material events: 1) Cook’s Furniture Ltd has purchased a property in Adelaide Australia on 20 July 2020 for AUD 3,200,000 and intended to use it as...

Subjects