You are an audit manager currently finalizing your 31 December 2013 audits. The following independent and material matters have come to your attention:
1. The audit of the statutory records of Whale Ltd, a reporting entity, revealed the following problems:
•   Failure to update the members’ register for changes in shareholders;
•   Failure to obtain written consent from directors to act;
•   Directors’ minutes not prepared in respect of the current year;
•   Failure to hold the AGM in respect of the previous financial year.
The company made no comment in respect of either the failure to keep properly updated statutory registers or the holding of the AGM.

2.   Shark Ltd, a reporting entity, uses the last-in first-out basis in respect of valuation of closing inventory, which is one of the most significant balance sheet accounts. The difference between first-in first-out and last-in-first-out has a material effect on the closing inventory balance.

3.   ABC Ltd (ABC) is a holding company with a number of wholly owned subsidiaries. One of these, FX Ltd (FX), is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout South-East Asia. The group accounts of ABC and its subsidiaries consist of the consolidated accounts of ABC and its subsidiaries and exclude the accounts of FX, which are attached separately.
The consolidated accounts include a note stating that the directors believe that it is misleading to consolidate FX as its operations are very different from those of the rest of the group and carried out under substantially different conditions. The note includes details of inter-company balances and transactions.

REQUIRED:
Critically discuss in relation to each of the above circumstances the audit and internal control issues to be considered and their likely impact on the audit report to be issued.

Define and explain what he means by the Third Practice: “Challenge the Status Quo”. 2.) Why is this concept so important to the success of project managers in modern organizations? 3.) Provide at least one real-life example

Explain the audit reports option available for auditor when auditing financial statements.

Product Costs using Activity Rates

Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

The activity-base usage quantities and units produced for each product were as follows:

Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product. If required, round the per unit answers to the nearest cent.

Cybernetronics Inc. (Cyber) is a Canadian-owned public company which designs and manufactures communications and control systems. The company's year end is May 31. It is now June 2018.

You, CPA, are the manager for the audit of Cyber and yesterday had met with the treasurer to discuss the year-end audit. The partner responsible for this client has asked you to prepare a report for the client which discusses important financial accounting issues and a memo to him regarding the audit issues you believe are important.

In April 2018, Cyber introduced a price protection policy for its customers to stimulate sales. Cyber promised customers that if it reduced prices after the customer made its purchase Cyber would reduce the customer's liability accordingly or refund the appropriate amount. On June 14, 2018, Cyber reduced its selling prices by 15%. Sales affected by the price protection policy as at May 31, 2018 were recognized in the amount of $2.4 million.

In May 2018, Cyber entered into an arrangement with a real estate company whereby Cyber provided robotic cleaning machines in exchange for free rent at its head office location. The cost of the machines delivered to the real estate company was $900,000 and would have a selling price of $1,500,000. Cyber is not required to pay rent for twelve months commencing June 1, 2018. This represents a savings in lease costs of $1,200,000 to Cyber. This transaction allowed Cyber to reduce its inventory of these machines which management felt was too high. Cyber's draft year-end financial statements do not reflect this transaction.

Senior management of Cyber is concerned about the new requirement to disclose management compensation figures. They want to avoid any criticism that their total compensation is not warranted based on Cyber's financial performance.

*Identify the accounting and audit issues*

The following comparative current asset information has been extracted from a balance sheet for two successive years. Complete a horizontal analysis for years 0007 too 0008 and a vertical common-sized analysis for year 0008. show the increase (+) or decrease (-) in dollars and the percentage of changes in the horizontal analysis

Suppose that you are a member of a team assembled to examine needs and decide on an IT strategy of non-profit organization. What are the steps you will take in understanding the needs, the costs, alternatives and implementation?

The following accounts were extracted from Salem Company by end of the year:

Accounts payable      

Accounts receivable

Accumulated depreciation- Building

Accumulated depreciation-equipment

Bonds payable

Buildings

Cash                                     

Copyright

Equipment

Inventory

Investment (long term

Investment in six-month securities

Capital

Land

Prepaid rennet

Revenue received in advance

Required:

• List the main items of the classified financial position.
• Prepare the balance sheet format out of the above accounts.

The following data are from the accounting records of Niles Castings for year 2.

a. Prepare a gross margin income statement.

b. Prepare a contribution margin income statement.

The AHMADO company’s’ record showed the alphabetical order of the accounts as follows:

Accounts payable            SR20                                                     

Accounts receivable       SR12                                                     

Accumulated depreciation – computer SR5        

Ahmed Capital SR30                                                                     

Ahmed Withdrawal         SR10                                                     

Cash      SR 51                                                                                    

Computer           SR50     

Prepaid insurance            SR 7

Service revenue                               SR70

Supplies               SR 5

Unearned revenues       SR15

Utilities expense              SR 15

Wages                  SR 10

Required:

• Prepare the trial balance by listing the accounts in correct order with balances in appropriate debit or credit column
• Adjust accounts, if you have the following facts:
  • Expired Insurance SR 5.
  • Estimated depreciation on office computer SR 5.
  • Accrued wages SR 5
  • Unused supplies on hands   SR 3.
  • SR 5 Of the unearned revues balance had been earned by the end of the month.
• Prepare income statement
• Prepare balance sheet
• Use worksheet to answer

Problem 5-5 Presented below is the balance sheet of Sargent Corporation for the current year, 2017. MARIGOLD CORPORATION BALANCE SHEET DECEMBER 31, 2017 Current assets $ 488,150 Current liabilities $ 383,150 Investments 643,150 Long-term liabilities 1,003,150 Property, plant, and equipment 1,723,150 Stockholders’ equity 1,773,150 Intangible assets 305,000 $3,159,450 $3,159,450 The following information is presented. 1. The current assets section includes cash $153,150, accounts receivable $173,150 less $13,150 for allowance for doubtful accounts, inventories $183,150, and unearned rent revenue $8,150. Inventory is stated on the lower-of-FIFO-cost-or-market. 2. The investments section includes the cash surrender value of a life insurance contract $43,150; investments in common stock, short-term $83,150 and long-term $273,150; and bond sinking fund $243,700. The cost and fair value of investments in common stock are the same. 3. Property, plant, and equipment includes buildings $1,043,150 less accumulated depreciation $363,150, equipment $453,150 less accumulated depreciation $183,150, land $503,150, and land held for future use $270,000. 4. Intangible assets include a franchise $168,150, goodwill $103,150, and discount on bonds payable $33,700. 5. Current liabilities include accounts payable $143,150, notes payable-short-term $83,150 and long-term $123,150, and income taxes payable $33,700. 6. Long-term liabilities are composed solely of 7% bonds payable due 2025. 7. Stockholders’ equity has preferred stock, no par value, authorized 200,000 shares, issued 73,150 shares for $438,900, and common stock, $1.00 par value, authorized 400,000 shares, issued 103,150 shares at an average price of $10. In addition, the corporation has retained earnings of $302,750. Prepare a balance sheet in good form, adjusting the amounts in each balance sheet classification as affected by the information given above. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.) MARIGOLD CORPORATION Balance Sheet Assets $ $ : $ : : $ Liabilities and Stockholders' Equity $ $ $ : $

a) What does the Postclosing Trial Balance represent? What is included in it and why is it important?

b) What are the temporary accounts and why are they closed each period?

c) Describe the closing entries and prepare them in proper form?

d) Identify the steps in the accounting cycle.

In April 2010, a gold mining company, Cahaya Emas was formed. Cahaya Emas had convinced numerous mining experts that they had rights to one of the largest gold deposits ever discovered. The gold mine, located on a remote island in the East Coast of Peninsula Malaysia, supposedly had so much gold that the actual price of gold on the open market dropped significantly due to the anticipation of an increased gold supply. Within a few months, thousands of Malaysian – big-time investors, pension and mutual fund, managers and many small investors, including factory workers – got caught up in “Gold fever”. The company’s stock price shot from pennies to more than $250 per share before a 10-for-1 stock split was announced. Thousands of investors believed they were on the verge of becoming millionaires.
Two years later, the president and CFO, who are also the founder of the company were found committing financial statement fraud which went on for about two years. The president and the CFO were the fraud perpetrators. Kate, the accountant was aware of the financial statement fraud being committed by the management of her company, but she never reported it.
As is the case with many frauds of this type, numerous class-action lawsuits were filed against Cahaya Emas management, alleging that they misled the shareholders.

REQUIRED:
A.   Discuss some of the possible reasons for Kate’s hesitance to come forward to report the financial statement fraud.
B.   What were some of the perpetrators’ motivations to commit financial statement fraud?