Question

In: Accounting

In your audit of Canyon Outdoor Provision Company’s financial statements, the following transactions came to your...

In your audit of Canyon Outdoor Provision Company’s financial statements, the following transactions came to your attention:

1. Canyon Outdoor’s operating lease for its main store is with York Properties, which is a real estate investment firm owned by Travis Smedes. Mr. Smedes is a member of Canyon Outdoor’s board of directors.

2. One of Canyon Outdoor’s main supplies for kayaks is Hessle Boating Company. Canyon Outdoor has purchased kayaks and canoes from Hessel for the last 25 years under a long-term contract arrangement.

3. Short-term financing lines of credit are provided by Cameron Bank and Trust. Suzanne Strayhorn is the lending officer assigned to the Canyon Outdoor account. Suzanne is the wife of the largest investor of Canyon Outdoor.

4. Hillsborough Travel partners with Canyon Outdoor to provide hiding and rafting adventure vacations. The owner of Hillsborough Travel lives in the same neighborhood as the CEO of Canyon Outdoor. They are acquaintances, but not close friends.

5. The board of directors consists of serval individuals who own stock in Canyon Outdoor. At a recent board meeting, the board approved its annual dividend payable to shareholders effective June 1.

Instructions

1. Read the background information above

2. Which of the transactions listed in the Background Information would most likely be considered a related party transaction?

3. Provide in-depth reasoning regarding your decision.

Expert Solution

Part 2

There are two transactions that would most likely be considered a related party transaction and they are as follows:

-Canyon Outdoor’s operating lease for its main store is with York Properties, which is a real estate investment firm owned by Travis Smedes. Mr. Smedes is a member of Canyon Outdoor’s board of directors.(Transaction 1)

-Short-term financing lines of credit are provided by Cameron Bank and Trust. Suzanne Strayhorn is the lending officer assigned to the Canyon Outdoor account. Suzanne is the wife of the largest investor of Canyon Outdoor. (Transaction 3)

Part 3

A related party is defined as “an affiliated company, a principle owner of the client company, or any other party with which the client deals, where one of the parties can influence the management or operating policies of the other. If the related party transactions or balances are material, then the following disclosures are necessary to get:

- the nature of the relationship or relationships,

- a description of the transaction for the period reported on, including amounts if any, and such other information deemed necessary to obtain an understanding of the effect on the financial statements,

- the dollar volume of transactions and the effects of any change in the method of establishing terms from those used in the preceding period,

- amounts due from or to related parties, and if not otherwise apparent, the terms and manner of settlement.

Considering all above essential requirements associated with the related party, it has been to include above transactions in the category of transactions most likely be considered a related party transaction.

ekkarill92 answered 1 year ago

4. What is the purpose of an audit of a company’s financial statements? 5. What are...

4. What is the purpose of an audit of a company’s financial statements? 5. What are audit objectives? 1. Explain the four sources of auditor liability.

A standard unqualified audit opinion states that financial statements “present fairly” a company’s results “in accordance...

A standard unqualified audit opinion states that financial statements “present fairly” a company’s results “in accordance with generally accepted accounting principles.” Does following GAAP necessarily “present fairly” a company’s operating results? 1) State and discuss you answer. Provide examples to support your opinion. What should a company do if following GAAP does not “present fairly” its operating results? 2) Write a clear and concise response to the above question.

Financial Statements: a. Financial accountants are responsible for preparing the company’s financial statements that will be...

Financial Statements: a. Financial accountants are responsible for preparing the company’s financial statements that will be used by owners, managers, external stakeholders, government taxing authorities, and potential investors. As a result, these three statements are considered an indicator of a business’s financial health. Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each. b. Identify four different consumers (users) of a company’s accounting information. For each of the four...

Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements,"...

Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements," provides a guide for auditors when performing integrated audits. by visiting PCAOB website How should the auditor determine which controls to test? How might the auditor use evidence obtained in the audit of the financial statements when concluding on the effectiveness of internal control over financial reporting?

An integrated audit is defined as ___. an audit of a client’s financial statements both the...

An integrated audit is defined as ___. an audit of a client’s financial statements both the external and internal auditors performing the financial statement audit performing the financial statement audit and the audit of the effectiveness of internal control over financial reporting (ICFR) at the same time an audit of a client's system of internal control If an internal control exception is identified, the auditor___. must use their professional judgment to determine if the exception is a control deficiency, a...

In your own terms and understanding, state briefly the objective of an audit of financial statements....

In your own terms and understanding, state briefly the objective of an audit of financial statements. In general terms, how do auditors meet that objectives? As a follow up and related to the previous discussion, distinguish between management's and the auditor's responsibility for the financial statements being audited.

Profitability Ratios The following data came from the financial statements of St. James Corp. for 2019...

Profitability Ratios The following data came from the financial statements of St. James Corp. for 2019 and 2018. 2019 2018 Net income $150,500 $120,000 Cash dividends paid on preferred stock $15,000 $15,000 Cash dividends paid on common stock $42,000 $38,000 Weighted average number of preferred shares outstanding 20,000 20,000 Weighted average number of common shares outstanding 105,000 95,000 Required: Calculate St. James' earnings per share as it would be reported on the 2019 income statement. Round your answer to the...

Managerial accountants usually do which of the following? Multiple Choice audit financial statements prepare and audit...

Managerial accountants usually do which of the following? Multiple Choice audit financial statements prepare and audit tax returns prepare internal reports for management investigate companies for possible violations of law

describe what is the difference between the audit of financial statements and the audit of internal...

describe what is the difference between the audit of financial statements and the audit of internal controls for U.S public companies. write 10-12 sentences.

Select one local government in your state or area and review the financial statements and audit...

Select one local government in your state or area and review the financial statements and audit report for the county or municipality. The financial statements of the government you selected should have at least three funds. Refer to the Continuing Problem homework for Weeks 1 through 3 for this assignment. Write a three- to five-page paper in which you do the following: Compare and contrast the Comprehensive Annual Financial Report (CAFR) of the selected local government entity with the government...