Orange & Co is the motor insurance company established on 1^st January 2005. The company is well known and generating positive cash flows for the first 10 years. From the year 2015, the Orange & Co profit was on declining trend. To make different corrective actions, the CEO of a company decided to change the CPA firm. The company hired Purple & co as a new CPA firm. Now suppose you are working in Purple & Co, and your CEO assigned you to perform audit procedures for the client Orange & Co and obtain sufficient audit evidence.

Required:

1. What are the different types of audit procedures that you as an auditor is planning to perform/adopt during audit process?

b. Support each type of audit procedure with relevant example. (10 marks

“US oil prices turned negative for the first time on record on Monday April 20th, 2020 after oil producers ran out of space to store the oversupply of crude left by the coronavirus crisis, triggering an historic market collapse which left oil traders reeling.” (The Guardian, April 20th, 2020)

On April 21st, 2020 the US president Donald Trump tweeted: “We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan, which will make funds available so that these very important companies and jobs will be secured long into the future!”

What factors or government policies do you think will help the price of oil to go up?

Exercise 22.4 Sustainability – developing countries

You are the accountant of a company that is considering expanding its operations to a developing country. The CEO has asked for a report outlining what issues the company should consider from a sustainability perspective when making this decision. Outline some of the key issues to be included in the report.

Reporting Earnings per Share Disclosures

Siera Inc. had 350,000 shares of no par common stock outstanding throughout 2020 that declared and paid dividends of $75,000 in 2020. The company also had 45,000 shares of preferred stock that paid dividends of $7,500 in 2020 (declared in 2020). The company reported the following amounts in its income statement for the year ended December 31, 2020 (pretax).

Required

a. Prepare the earnings per share section of the income statement for the year ended December 31, 2020, assuming a tax rate of 25%.

• Use a negative sign to indicate a loss.
• Round the per share amounts to two decimal places.

Required

b. Repeat requirement of part a except now assume that the company reported income from discontinued operations of $52,500.

• Use a negative sign to indicate a loss.
• Round the per share amounts to two decimal places.

You are the director of an admission office. Your job every year is to decide the number of offer letters to issue to undergraduate degree applicants. For the academic year 2016/2017, the university has a capacity to enroll 7,200 undergraduate students, but you received more than 20,000 applications. However, you know from past year records many students also got offers from other good schools in Canada and the US. The yield rate for this university is far less than 100%.

Assume the university has spent large amount of sunk cost in its undergraduate program for a designed capacity to enroll 7,200 students, such as upgrading classrooms, expanding residential houses, hiring additional teaching instructors and administration staff. As the admission office director, you need to consider following questions:

(a) Will you issue more than 7,200 offer letters for 2016/2017 academic year?

(b) What is the trade-off between issuing more than 7,200 offer letters and issuing exactly 7,200 offer letters?

(c) How to determine the optimal number of offer letters to issue? What information do you need, and how to get such information?

Respond to the following questions:

1. Does Thailand have a democracy?

2.  As CEO of a multinational that has already invested in and been successfully producing in Thailand (for both Thailand and overseas markets), when you heard the news about the 2006 and 2014 coup that toppled democratically elected governments, should you be concerned? Why or why not?

3. As CEO of a company that is ready to export to Thailand or that is ready to source from Thailand, would you be concerned about the political risk in Thailand? Would you proceed as planned or look for alternative export markets or alternative countries from which to source products?

Need to make journal entires

Your top sales officer met with a new customer to discuss a potential future contract. She informs you that the customer is considering signing the $200,000 deal, which would become effective February 2020. ACCY1 Accounting Fundamentals Group Project 7 30. On October 1st, you purchased 11,250 units at the decreased price of $61 per unit. The purchase was made on account. 31. On October 10th you paid your supplier $132,000 cash for inventory purchased on account. November 32. November 1 st, the CEO, in an effort to adjust ratios, ordered the repurchasing of the company’s own stock. The quantity of stock repurchased was 175,000 shares. 33. Purchased a three-year building insurance policy on November 1st for $442,000 cash. [Adjusting Entry Required] 34. On November 17th a customer pays you $450,000 for work that you will finish in January of 2020. 35. November 19th , your customers bought 8,650 units of your product at $110 per unit. The cost of this product is determined by the method of inventory valuation used by your company. Customers paid you 55% in cash and the remainder was on account. 36. An employment contract is signed with a new regional manager. You have offered him $150,000 per year. He will not begin working for the company until March 2020.

A Hong Kong listed company has over 80% voting shares being held by the Chief Executive Officer (“CEO”) and the Executive Director (“ED”). Both the CEO and the ED are graduated from famous universities and from wealthy families. They involved in the daily operations of the listed company and all sales and purchase transactions above HK$100,000 have to be approved by both of them.

They have weekly meetings with the respective department heads discussing each department’s financial and operational affairs. Each department is assigned with financial budget which is achievable, and meeting financial budget is not the only criterion in assessing employees’ performance.

The company’s board of directors emphasizes ethical behavior seriously, and serious breach in those ethical guidelines will not be tolerated. The company has maintained a stable performance during the past seven years with moderate increment of profit and a relatively high dividend pay-out ratio.

The company has engaged a consulting firm to redesign its internal control system at the beginning of the year, and the system has just been implemented. The CEO and the ED expect the new system will further strengthen the company’s information flow.

Required:

1. Discuss the THREE characteristics of fraud.

2. Assume you are the audit engagement senior manager and you are now assessing the risk of fraud for this listed company. Based on information provided, discuss and explain your risk assessment of fraud due to the management and the employees.

Use the following information on the U.S. dollar value of the euro.

On October 30, 2020, a U.S. company receives a purchase order from a customer in Spain. Under the sale terms, the customer will pay the company €100,000 on April 30. On October 30, the U.S. company also enters a forward contract to sell €100,000 on April 30, 2021. The company delivers the merchandise to the customer on November 1. On April 30, the company receives €100,000 from the customer and sells it using the forward contract. The company's accounting year ends December 31.

What net gain or loss is recognized in 2020, in addition to sales revenue?