Question
In: Accounting
The case states that the firm of Abernethy and Chapman is considering the acceptance of clients...
The case states that the firm of Abernethy and Chapman is considering the acceptance of clients that are publicly traded. What specific steps would the firm have to take before they could accept an audit client that is publicly traded?
Solutions
Expert Solution
The firm should consider whether a relationship with or service provided by an auditor :
a)creates a mutual or conflicting interest with their audit client
b)places them in the position of auditing their own work
c)results in their acting as management or an employee of the audit clent ;or
d)places them in a position of being an advocate for the audit client
Specific Prohibited Non -Audit Services
providing following non -audit services to an audit client including its affiliates :
*Bookkeeping
*Financial information system design and implementation
*Appraisal or valuation services ,fairness option or cntribution in kind reports
*Actuarial services
*internal audit outsourcing services
*management function or human resourses
legag services and expert servicesunrelated to the audit
Pre -approval of Permitted services
alisting company standard require to pre approve all audit ,review and attest services regardless of whether the firm performing the services is the company principal auditor
ekkarill92 answered 1 year agoRelated Solutions
Scenario: The firm of Abernethy and Chapman was asked to do consulting work for the Lakeside...
Scenario: The firm of Abernethy and Chapman was asked to do
consulting work for the Lakeside company that is completely
separate and unrelated to the audit of the financial statements.
Discuss the potential conflict of interest when an auditor does
consulting work for an audit client. Does this relationship cause
the independence of the auditor to be violated? Why or why not?
Since the Enron debacle, how has the accounting profession dealt
with this issue?
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2017. As of that date, Abernethy has the following
trial balance:DebitCreditAccounts payable$53,700Accounts
receivable$41,000Additional paid-in capital50,000Buildings (net)
(4-year remaining life)184,000Cash and short-term
investments77,250Common stock250,000Equipment (net) (5-year
remaining life)400,000Inventory117,500Land107,500Long-term
liabilities (mature 12/31/20)173,000Retained earnings,
1/1/17417,450Supplies16,900Totals$944,150$944,150During 2017,
Abernethy reported net income of $98,000 while declaring and paying
dividends of $12,000. During 2018, Abernethy reported net income of
$128,250 while declaring and paying dividends of $39,000.Assume
that Chapman Company acquired Abernethy’s common stock...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2017. As of that date, Abernethy has the following
trial balance:DebitCreditAccounts payable$55,100Accounts
receivable$44,700Additional paid-in capital50,000Buildings (net)
(4-year remaining life)163,000Cash and short-term
investments83,750Common stock250,000Equipment (net) (5-year
remaining life)207,500Inventory122,000Land85,500Long-term
liabilities (mature 12/31/20)162,500Retained earnings,
1/1/17202,150Supplies13,300Totals$719,750$719,750During 2017,
Abernethy reported net income of $105,000 while declaring and
paying dividends of $13,000. During 2018, Abernethy reported net
income of $136,750 while declaring and paying dividends of
$36,000.Assume that Chapman Company acquired Abernethy’s common
stock...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2020. As of that date, Abernethy has the following
trial balance:
Debit CreditAccounts payable $55,100Accounts
receivable$44,700 Additional paid-in
capital 50,000Buildings (net) (4-year
remaining life) 163,000 Cash and short-term
investments 83,750 Common
stock 250,000Equipment (net) (5-year
remaining life) 207,500 Inventory
122,000 Land 85,500 Long-term
liabilities (mature
12/31/23) 162,500Retained earnings,
1/1/20 202,150Supplies
13,300 Totals$719,750 $719,750
During 2020, Abernethy reported net income of $105,000 while
declaring and paying dividends of $13,000. During 2021, Abernethy
reported net income of $136,750 while declaring and paying...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2020. As of that date, Abernethy has the following
trial balance:
Debit CreditAccounts payable $55,800Accounts
receivable$42,500 Additional paid-in
capital 50,000Buildings (net) (4-year
remaining life) 209,000 Cash and short-term
investments 67,250 Common
stock 250,000Equipment (net) (5-year
remaining life) 357,500 Inventory
136,000 Land 114,000 Long-term
liabilities (mature
12/31/23) 168,500Retained earnings,
1/1/20 414,650Supplies
12,700 Totals$938,950 $938,950
During 2020, Abernethy reported net income of $104,500 while
declaring and paying dividends of $13,000. During 2021, Abernethy
reported net income of $137,750 while declaring and paying...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2020. As of that date, Abernethy has the following
trial balance:
Debit
Credit
Accounts
payable
$
56,700
Accounts
receivable
$
43,800
Additional
paid-in capital
50,000
Buildings (net)
(4-year remaining life)
143,000
Cash and
short-term investments
80,250
Common
stock
250,000
Equipment (net)
(5-year remaining life)
295,000
Inventory
110,500
Land
112,000
Long-term
liabilities (mature 12/31/23)
171,000
Retained
earnings, 1/1/20
268,750
Supplies
11,900
Totals
$
796,450
$
796,450
During 2020, Abernethy...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2020. As of that date, Abernethy has the following
trial balance:
Debit
Credit
Accounts
payable
$
57,700
Accounts
receivable
$
45,000
Additional
paid-in capital
50,000
Buildings (net)
(4-year remaining life)
124,000
Cash and
short-term investments
68,250
Common
stock
250,000
Equipment (net)
(5-year remaining life)
327,500
Inventory
103,000
Land
106,000
Long-term
liabilities (mature 12/31/23)
183,500
Retained
earnings, 1/1/20
252,350
Supplies
19,800
Totals
$
793,550
$
793,550
During 2020, Abernethy...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2017. As of that date, Abernethy has the following
trial balance:
Debit
Credit
Accounts payable
$
59,500
Accounts receivable
$
46,600
Additional paid-in capital
50,000
Buildings (net) (4-year remaining life)
145,000
Cash and short-term investments
84,250
Common stock
250,000
Equipment (net) (5-year remaining life)
257,500
Inventory
106,000
Land
129,000
Long-term liabilities (mature 12/31/20)
151,000
Retained earnings, 1/1/17
273,050
Supplies
15,200
Totals
$
783,550
$
783,550
During 2017, Abernethy...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2020. As of that date, Abernethy has the following
trial balance: Debit Credit Accounts payable $ 55,800 Accounts
receivable $ 42,500 Additional paid-in capital 50,000 Buildings
(net) (4-year remaining life) 209,000 Cash and short-term
investments 67,250 Common stock 250,000 Equipment (net) (5-year
remaining life) 357,500 Inventory 136,000 Land 114,000 Long-term
liabilities (mature 12/31/23) 168,500 Retained earnings, 1/1/20
414,650 Supplies 12,700 Totals $ 938,950 $ 938,950 During 2020,
Abernethy...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...
Chapman Company obtains 100 percent of Abernethy Company’s stock
on January 1, 2017. As of that date, Abernethy has the following
trial balance:
Debit
Credit
Accounts payable
$
58,000
Accounts receivable
$
40,200
Additional paid-in capital
50,000
Buildings (net) (4-year remaining life)
170,000
Cash and short-term investments
66,750
Common stock
250,000
Equipment (net) (5-year remaining life)
372,500
Inventory
109,500
Land
116,000
Long-term liabilities (mature 12/31/20)
165,000
Retained earnings, 1/1/17
369,150
Supplies
17,200
Totals
$
892,150
$
892,150
During
2017, Abernethy...
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