[Audit Reports]

Presented below are independent audit scenarios involving nonpublic clients that prepare GAAP-basis
financial statements. You are assumed to be the reporting auditor on all these engagements, and they are
for the current year only, i.e., the client is presenting single-year (rather than comparative) financials.

Required—Indicate the type of report you should issue in each scenario assuming that the matter
described is material but not pervasively so (unless otherwise implied), and do so by using one of the
options below accompanied by a brief explanation:

SR = auditor’s standard report
UOREM = unqualified opinion with required emphasis-of-matter paragraph
UODEM = unqualified opinion with discretionary emphasis-of-matter paragraph
UOROM = unqualified opinion with required other-matter paragraph
UODOM = unqualified opinion with discretionary other-matter paragraph
QOGD = qualified opinion due to a GAAP departure
QOSL = qualified opinion due to a scope limitation
AO = adverse opinion
DO = disclaimer of opinion

1. A significant portion of the revenues of Child Company come from a single customer, Parent Company,
a business owned by the parents of Child’s CEO. Child has disclosed these transactions and the CEO’S
relationship to Parent’s owners.
2. Switched Company used current (“marked-to-market”) prices to value its inventory in prior years but
this year changed to FIFO.
3. Just Us Company has decided not to prepare a statement of cash flows because as a family owned
business with no outside investors, it believes that its shareholders do not find the statement useful.
4. XY&Z Company learned that it is being sued for breach of contract over a dispute that arose prior to
year-end. XY&Z has made no disclosure of the case, but the company’s legal counsel has confirmed
XY&Z’s position in the attorneys’ letter, specifically, that the likelihood of XY&Z losing the case is
remotely possible but not probable.
5. X&YZ Company learned that it is being sued for breach of contract over a dispute that arose prior to
year-end. X&YZ has made no disclosure of the case, but the company’s legal counsel has confirmed
X&YZ’s position in the attorneys’ letter, specifically, that the likelihood of X&YZ losing the case is
reasonably possible but not probable.
6. During your audit of AB&C Company, you were unable to observe the physical inventory because
you were hired after the company’s year-end. You were not able to satisfy yourself as to the fair
presentation of AB&C’s inventories through other audit procedures.
7. During your audit of A&BC Company, you were unable to confirm accounts receivable because
management did not allow you to do so out of concern about complaints from customers. You were not
able to satisfy yourself as to the fair presentation of A&BC’s receivables through other audit procedures.

A polling organization collected data on a sample of 60 registered voters regarding a tax on the market value of equity transactions as one remedy for the budget deficit.

a. Compute gamma for the table.
b. Compute tau b or tau c for the same data.
c. What accounts for the differences?
d. Decide which is more suitable for these data.

Please answer all parts. Do not copy answers from other source. NEED FULL EXPLANATION. Please paste excel screenshot if you are using it.

As you embark on your new career with “We Crunch the Numbers” you are confronted with a new problem, managing your own money. The firm has a 401(k) as well as money you want to invest outside your 401(k). You recently received a call from a former classmate who is a financial advisor. Your classmate guarantees to beat the S&P 500 for a fee of 1% of your total assets, annual. You took one financial class in your MBA and you are a strong believer in market efficiency. You also are aware that Vanguard has S&P 500 ETF that has an annual expense ratio of .03%. What is your decision?

Suppose marginal benefit from a hectare of for a public park (assume it is a pure public good) for two groups of consumers (A and B) is given by: MBa = 10 − Q and MBb = (8 – Q)/2 where Q is the number of hectares of the park. To simplify our analysis, assume that there are only 1 consumer of each type. The marginal cost to provide the park is a constant $5.

a) What is the socially efficient number of hectares for the park?

b) Assume that the consumers each makes a voluntary contribution to a fund which will be used to build the park. The size of the park depends on the amount of money collected. How many hectares will be built in the end? Assume both consumers know the marginal cost and marginal benefit function of each type.

Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for $1,600,000 on January 1, 2017, when Sexton Company's retained earnings were $800,000. On January 1, 2019, Prout Company sold fixed assets to Sexton Company for $360,000. These assets were originally purchased by Prout Company for $400,000 on January 1, 2009, at which time their estimated depreciable life was 25 years. The straight‐line method of depreciation is used.

On December 31, 2020, the trial balances of the two companies were as shown here:

Required:

1. Prepare a consolidated statements workpaper for the year ended December 31, 2020.
2. Assuming that on January 1, 2021, Sexton Company sells the fixed assets purchased from Prout Company to a party outside the affiliated group for $300,000:
   1. Prepare the entry that would have been entered on the books of Sexton Company to record the sale.
   2. Prepare entries for the December 31, 2021, consolidated statements workpaper necessitated by the sale of the assets.
   3. Prepare any workpaper entries that will be needed in the December 31, 2022, consolidated statements workpaper in regard to these fixed assets.

On 1 No 2016, Burwood Limited based in Australia ordered inventories to the value of US $ 3000000 on FOB destination terms. The goods are shipped on 1 April 2017 and are paid for on 30 June 2017. Burwood Limited also entered into a forward exchange contract of  US $ 3000000 on 1 Nov 2016 with NYC Bank in which NYC Bank agrees to supply Burwood Limited with US $ 3000000 on 30 June 2017. Burwood Limited has a FY ending on 31 Dec.

Additional information on exchange rates

Management adopts cashflow hedge accounting.

Required:

Prepare a table showing gain/losses on the hedging instrument (the forward rate contract ) and also provide necessary journal entries to record the above transactions from 1.11.2016 to 30.06.2017

Cheyenne Company purchases an oil tanker depot on January 1, 2020, at a cost of $648,500. Cheyenne expects to operate the depot for 10 years, at which time it is legally required to dismantle the depot and remove the underground storage tanks. It is estimated that it will cost $79,920 to dismantle the depot and remove the tanks at the end of the depot’s useful life.

Prepare the journal entries to record the depot and the asset retirement obligation for the depot on January 1, 2020. Based on an effective-interest rate of 6%, the present value of the asset retirement obligation on January 1, 2020, is $44,627.

Prepare any journal entries required for the depot and the asset retirement obligation at December 31, 2020. Cheyenne uses straight-line depreciation; the estimated salvage value for the depot is zero.

On December 31, 2029, Cheyenne pays a demolition firm to dismantle the depot and remove the tanks at a price of $84,200. Prepare the journal entry for the settlement of the asset retirement obligation.

Texas A&M decides to invite a high profile band to perform during graduation week at Kyle stadium since they anticipate a very high demand for entertainment during that time. After carefully considering Rolling Stones and Justin Bieber, the university decides that Rolling Stones are the better choice (no kidding!). The band agrees to perform at the modest price of $500,000 (paid after the concert). As a result of the agreement, the university sells $1,000,000 worth of tickets for the concert. Justin Bieber would have agreed to perform for $100,000, but would have generated only $400,000 in revenue. The university orders $20,000 worth of the band merchandise to give away in the weeks prior to the concert to advertise the event. They also spent $50,000 on an ice statue of the band positioned in front of the Evan's library that does not have any useful purpose besides looking cool. The day of the event, Rolling Stones cancels due to a rough night for the band partying in a local pub. The university is forced to reimburse people for their tickets and spends additional $200,000 to compensate out of town individuals for incidental expenses associated with attending the concert. The university sues the band for breach of contract.

You are hired to represent the university in the lawsuit. You insist that the appropriate damages for the university are expecation damages. What is the amount of the expectation damages to the university?

Given the reputation of the band, the court decides that opportunity cost damages are more appropriate in this case. What is the size of the opportunity cost damages? Assume that the $70,000 expense for the merchandise give away and the ice statue would not have been incurred if the university contracted with Bieber.

Suppose that the university is willing to settle for reliance damages. What is the amount of these damages?

The defense argues that the university's expense on the ice statue was unreasonable. They request the court to reward hypothetical expectation damages. If the court finds their argument convincing, what should be the amount of the hypothetical expectation damages awarded to the university?

With globalization, many business organizations have come to terms that increasingly their employees come from a range of different religious, national and cultural background. As CEO of a multinational firm operating in Ghana, with knowledge in the concepts and principles of Business Ethics offer an example and explain how you will manage your employees.