The competence (reliability) of audit evidence cannot be improved by testing a large sample of items.

True

False

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

True

False

Audit evidence related to balance sheet accounts is more persuasive when it is accumulated during the entire period under audit, than when it is obtained only during the period near the balance sheet date.

True

False

Cost should never be a consideration when making decisions about evidence for a given audit.

True

False

Physical examination is usually more costly than observation.

True

False

Analytical procedures are usually the most costly type of evidence.

True

False

Physical examination is normally more reliable than observation.

True

False

Inquiries of the client are rarely sufficient by themselves to provide competent evidence to satisfy an audit objective.

True

False

A canceled check written by the client, made payable to a local vendor, and drawn on the client’s bank account is one type of internal document.

True

False

When the client’s internal controls are good, internal documents ate more reliable than internal documents.

Truer

False

Whenever practical and reasonable, the confirmation of accounts receivable is required of CPAs.

True

False

Confirmations are ordinarily not used to verify individual transactions such as sales.

True

False

Of the three common types of confirmation used by auditors, the most reliable type is the positive confirmation with the information to be included on the form

True

False

Analytical procedures are required during the planning and completion phases on all financial statements audits.

True

False

The competence (reliability) of audit evidence cannot be improved by testing a large sample of items.

True

False

Objective evidence is more reliable, and hence more persuasive, than subjective evidence.

True

False

Audit evidence related to balance sheet accounts is more persuasive when it is accumulated during the entire period under audit, than when it is obtained only during the period near the balance sheet date.

True

False

Cost should never be a consideration when making decisions about evidence for a given audit.

True

False

Physical examination is usually more costly than observation.

True

False

Analytical procedures are usually the most costly type of evidence.

True

False

Physical examination is normally more reliable than observation.

True

False

Inquiries of the client are rarely sufficient by themselves to provide competent evidence to satisfy an audit objective.

True

False

A canceled check written by the client, made payable to a local vendor, and drawn on the client’s bank account is one type of internal document.

True

False

When the client’s internal controls are good, internal documents ate more reliable than internal documents.

Truer

False

Whenever practical and reasonable, the confirmation of accounts receivable is required of CPAs.

True

False

Confirmations are ordinarily not used to verify individual transactions such as sales.

True

False

Of the three common types of confirmation used by auditors, the most reliable type is the positive confirmation with the information to be included on the form

True

False

Analytical procedures are required during the planning and completion phases on all financial statements audits.

True

False

An engineering firm is expanding its offices in the United States. The firm has selected four prime locations near major metropolitan areas. They want to determine if the average hourly wage is significantly different among the four chosen locations since this would impact overall cost. A survey of 20 wages of similar positions in each of the four locations was taken by random sampling, thus the sample size in each location was 5. The following ANOVA table was created based off the results of the study, let α = 0.05. Source of Variation SS df MS F Between Groups 95.28 3 31.76 4.3101 Within Groups 117.9 16 7.36875 Total 213.18 19 (a) Determine whether the following statement is true or false. It would be appropriate to perform the Tukey-Kramer (T-K) multiple comparisons procedure to identify differences in the means of the four locations. True False (b) The Tukey-Kramer method uses the formula (xi − xj) ± q MSE 2 1 ni + 1 nj . Using the formula, how many intervals will need to be calculated for this scenario to look at all pairwise comparisons for the study? (c) The Tukey-Kramer method uses the formula (xi − xj) ± q MSE 2 1 ni + 1 nj . Using the formula, what is the value of q from the table for this scenario? (Use a table.) (d) Consider the sample mean hourly wage for the four locations are: Location 1 = $42, Location 2 = $32, Location 3 = $37, Location 4 = $35. Are the mean hourly wages significantly different for Location 1 and Location 4? Yes No

In 2015, Slim Drug Company began to notice problems with its obesity drug. The company stopped selling the drug near the end of 2015. In the last six months of 2016, the company was sued by 1,000 people who had an allergic reaction to the company's obesity drug. At the end of 2016, the company's attorneys believe there is a 60% chance the company will need to make payments in the range of $1,000 to $5,000 to settle each claim. At the end of 2017, while none of the cases have been resolved, the company's attorneys now believe there is an 80% chance the company will need to make payments in the range of $2,000 to $7,000 to settle each claim. In 2018, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30% of the remaining cases will be settled for $3,000 each, 50% will be settled for $5,000 and 20% will be settled for $10,000 each.

Using IFRS what journal entries would be required in 2016?

a. There would be no entry since no claims had be made

b. There would be a debit to prepaid legal provision expense and a credit to legal provision for claims of $3,000,000.

c. There would be a debit to litigation expense and a credit to legal provision for claims of $3,000,000

d. There would be recorded as a long-term liability as the claim is possible.

Using U.S. GAAP what journal entries would be required in 2016?

a. There would be a debit to accrued legal provision expenseand a credit to legal provision for claims of $3,000,000.

b. There would be no entry since no claims had be made

c. There would be a debit to litigation expense and a credit to legal provision for claims of $2,000,000

d. There would be recorded as a long-term liability as the claim is possible.

MY QUESTION IS SUMMARIZE ACCURATELY PLEASE AVOID SUMMARIZING TOOL,

Analyzing your industry

In every industry, no matter what product or service it provides, there are five basic forces of competition. Taken together they determine the industry's attractiveness and its long-term profitability.

First, and maybe most obvious, is the character of the rivalry among the competitors. Competition can be gentlemanly and subdued, or it can be vicious and warlike. If competition in your industry is like a guerrilla war, if someone is always attacking your position, that makes the industry less attractive and less profitable. If the competition is more focused on image and service than on price cutting, the whole industry will be more profitable.

Then there is the threat of new entrants. If it is easy for someone else to get into the business, to add new capacity and erode prices, that too will cut into profits. But if there are effective barriers to entry, all the companies in the business will do better.

Another factor: the threat of substitute products or services. Whatever your business does, customers nearly always have other ways of satisfying their needs. If you make aluminum windows, you have to worry about makers of vinyl windows. If you are a traditional full-service stockbroker, you have to worry about discount brokers. If customers have plenty of alternatives to choose from, that too will eat into your profitability.

Then too, your profits may be constrained by suppliers, on the one hand, or by customers, on the other.

The bargaining power of suppliers determines how much they can force up the price of what you have to buy. If you are buying mostly commodities and can switch suppliers easily, they will not have much leverage. But if you are dependent on specialty suppliers or on one or two dominant vendors, you will have to pay whatever they ask.

The bargaining power of buyers similarly determines how much leeway you have in your own pricing. If your customers are a lot more powerful than you, they may beat you down on price, force you to provide many free services, or make you hold inventory and thus bear cost and risk. That can drive the return right out of your business.

The fundamental profit potential in any industry is determined by the balance of those five forces. At one end of the spectrum is an enormously attractive industry such as pharmaceuticals. It is hard for new companies to get into this business. The product -- effective therapeutic drugs -- has no real substitute. Most of the raw materials are commodities, so the suppliers are unimportant. Customers historically have not exercised much bargaining power -- indeed, they have been willing to pay top dollar for anything that made patients feel better. Finally, the rivalry has been extremely gentlemanly. Nobody competes on price, because every company knows it does not have to. That is why major pharmaceutical companies make a 20% return on investment every year.

At the other end of the spectrum is a business such as aluminum-window manufacturing. It is an industry that new competitors can easily enter. There are plenty of substitute products, such as wood and plastic windows. The suppliers are giant aluminum companies with a great deal of clout; the buyers are likely to be big retail or wholesale chains that beat up companies on price. And the rivalry is cutthroat because everyone is always trying to shave a little on price to cover overhead. If the pharmaceutical business gets five stars as an industry, aluminum windows gets zero. If you make a 10% return in any year, you're a hero.

To be sure, those are extreme cases. But your industry fits somewhere; it has a structure, and you can analyze it in terms of the five forces.

Reshaping your industry

If this were the end of the story, it would be a bit depressing: your success would depend on how well you had chosen your industry. But the story does not end here. In fact, the real insight for strategy is that industry structure can be changed. You, by the way you choose to compete, can influence every one of the five forces.

Some companies, for example, get around customers' bargaining power by giving them computer terminals and letting them order directly on-line. Suddenly, it's harder for the customer to order from another supplier. Similarly, companies can raise barriers to entry. A manufacturer might forge exclusive relationships with its retailers, preventing them from taking on competing lines. A company could offer speedier delivery to its customers, requiring more inventory and overhead, which would-be competitors would be hard-pressed to match. The point here is simple: if you think strategically, you can influence the structure of your industry in a positive way.

Once in a great while companies can effectively reshape an entire industry. American Airlines has done it, for example, in air transportation. After deregulation, air travel was a pretty unattractive business. It was easy to get into -- all you needed was a couple of planes, which could be heavily financed. Buyers had a lot of bargaining power because they viewed airline seats as commodities. And the rivalry was cutthroat. Airlines had high fixed costs and would do anything to fill their empty seats. So there were massive price wars, and the industry as a whole lost money.

American effectively changed the industry's structure. The company introduced a computer reservations system that cost more than $1 billion. Pretty soon anyone who wanted to be a serious competitor needed such a system -- and suddenly an upstart airline with a few planes could not play the game the same way anymore. American also aggressively pursued the hub-and-spoke concept, meaning that it had dozens of flights going in and out of one city. Now would-be competitors needed 10 or 20 flights going to a city, not just 2 or 3. And American set up the first frequent-flyer program. Even though it was quickly imitated, the program created brand loyalty, giving customers a big incentive to stick with the airline they flew on most. Taken together, those moves fundamentally changed the airline business. Except during the Gulf crisis and its aftermath, the industry's profitability has soared, and American has done better than most.

Positioning strategically

Most small companies, of course, cannot change an industry's structure. What they can do, however, is establish a good position in the industry -- a position based on sustainable competitive advantage.

What constitutes a competitive advantage? Well, advantage comes in only two basic varieties. You can have consistently lower costs than your rivals. As long as your product maintains an acceptable quality level, that will lead to higher margins. Alternatively, you can differentiate your product or service from your competitors', in effect making yourself unique at delivering something your customers think is important. That allows you to command a premium price. And provided you keep your costs under control, the premium price will translate into a superior return.

There is one other crucial variable in strategic positioning: what I call competitive scope. Some companies seek advantage in what might be called a broad scope: they serve more or less all types of customers in an industry, offering a wide product line and operating in many geographic areas. Companies with a narrow scope, alternatively, focus on a narrow range of customers or product varieties, or in one geographic region, and dedicate all their efforts to that one small niche or market segment.

These crucial choices in strategy lead to some different combinations, depending on the breadth of the target and the type of advantage sought. In cars, for example, Toyota is the broad, low-cost competitor, BMW and Mercedes-Benz the differentiators in the premium segment, and Hyundai the low-cost player in the price-sensitive segment.

There is room for several successful strategies, as long as each company makes a different choice from its rivals'. The worst error, however, is not to choose, to try a little bit of everything and therefore not have any advantage at all. That is what I call ``stuck in the middle.'' It does not work, because all good strategies involve trade-offs. You cannot be both low cost and differentiated at the same time, because being unique at quality or service usually involves higher costs. A sustainable competitive advantage comes from choosing an appropriate strategy and appropriate scope. For small companies, the operable choice is normally what is known as focus: narrowing the strategic target and dedicating every action to serving that target. Take the hotel business as an example. Nationally, it is dominated by big, full-service chains -- Marriott, Hilton, and so on. Each of them seems to offer everything a traveler could want: Comfortable accommodations. Bars, restaurants, room service. Meeting rooms, suites, health clubs, game rooms for the kids. You might think an upstart company would have no chance of finding, let alone defending, a profitable niche in the industry.

How, then, to explain the success of La Quinta Motor Inns, a company that grew from $61.8 million in 1980 revenues to $226.5 million in 1990?

La Quinta's success lies in strategy: in narrowing its target to the regular, middle-level business customer, the kind of traveler who visits a city over and over, and who does not have an unlimited expense account at his or her disposal.

What do those particular customers want? Mostly, a nice, comfortable room to sleep in. They do not want suites -- they cannot afford them. They do not want a lounge -- if they are going to drink, they know the city and have a car; they will go out. They do not even need a restaurant. La Quintas are always built next door to a Denny's or a Howard Johnson's, something open 24 hours a day, so guests can go get breakfast anytime.

The list goes on. Meeting rooms? No need. Room service? Too expensive. Recreation facilities? No time. Transportation? Already have it.

By not providing all those extras -- extras the La Quinta customer does not want anyway -- the hotel chain is able to lower dramatically the cost of providing a room. So even if it sells the rooms for $38 a night, as compared with $80 or $100 or even $120 at a Marriott, it can make a lot of money. That is focus.

Note one thing, however: if the typical hotel customer wandered into a La Quinta, there would be a lot of dissatisfaction. Room service? ``Sorry, we don't have it.'' How about a playground for the kids? ``Sorry.'' A good focused strategy inevitably makes many customers unhappy. But it is going to make a certain group of customers very, very happy, and that is the logic. You target all your efforts on those customers, and you achieve either lower costs or uniqueness in meeting their needs.

1. Tom is a civil engineer and working in a large construction project. Tom was assigned by his manager to look for steel suppliers for the project. Tom placed a newspaper advertisement for potential suppliers to bid. A potential supplier approached Tom, indirectly requested Tom to buy steel from his company. Then he invited Tom to an expensive dinner and a boat tour. Tom was planning to accept the dinner invitation and boat tour. (a) Identify the ethical situation in this case (if any) (b) Explain what Tom should do (c) Mention the relevant Rule of Practice or Professional Obligation (if any)

2. Nathan and Bill are electrical engineers. They are colleagues and working for a reputed private firm. One day Nathan saw that his colleague Bill is accepting a new laptop as a gift from a material supplier. Next day, Nathan talked with Bill about this and told him that this is not appropriate. Bill did not care. After a couple of months later, Nathan got to know that the same supplier has arranged a vacation (i.e., air ticket, hotel etc.) in Hawaii for Bill. (d) Identify the ethical situation in this case (if any) (e) Explain what Nathan should do (f) Mention the relevant Rule of Practice or Professional Obligation (if any)

Betty, the chief nursing officer, had to make a decision about buying 120 new hospital beds for patient rooms. After she interviewed nurse mangers at the units where the beds were going to be placed, Betty compiled her findings and decided to contact a well-known equipment company to obtain prices and contracts. The equipment company’s executive salesperson, Jim, discussed options at length with her and invited her and her significant other to an upcoming all-expenses-paid lavish retreat at a five-star hotel in Hawaii to see demonstrations of the beds and to hear a comprehensive sales pitch. Betty thought to herself, “We badly need some relaxation and stress relief. Hawaii would be so much fun. Would it be wrong for us to go?”

If you were Betty, what would you do? Give your rationale. Justify your answer with an ethical framework—a theory, approach, or principle.

Do you consider this situation a conflict of interest? Why or why not? Give your rationale.

What policies, if any, should be in place regarding a scenario such as this one? Do you have any such policies in place at work for similar situations? Do such policies impact day-to-day activities in any way?