Major "Big 6" Certified Public Accounting firms have three sources of revenue or three divisions: Audit, tax, and Management Consulting. But the real power resides in the Audit Department because the Audit Partners earn between $100,000-750,000 per year. An annual audit of a large U.S. corporation can cost over $500,000 each year.

The Securities and Exchange Commission (SEC) of the federal government requires that all corporations selling stock on the New York Stock Exchange be audited annually by an independent national CPA firm. The Audit Partner in-charge of the engagement directs the staff auditors to keep audit workpapers for evidence in case of a law suit. These workpapers show that the corporation is or is not maintaining generally accepted accounting principles (GAAP).

During an audit in Hollywood, California a staff auditor was completing an audit of a home health care corporation. During the investigation it was noticed that some of the accounting records were missing. It was common knowledge that the prior corporate controller had embezzled hundreds of thousands of dollars from the corporation and had fled the United States. The staff auditor commented in the workpapers that the missing files could be due to the embezzlement. Upon reviewing the workpapers, the Audit Manager rebuked the staff auditor for mentioning the embezzlement in the workpapers.

Questions:

1          What are the issues involved here? Explain in your own words

2          Should the audit workpapers be re-done? Explain in your own words

3          What would you do? Explain in your own words

4          What are the short and long term consequences of not reporting the embezzlement in the workpapers? Explain in your own words

5          What are the legal ramifications of this case? Explain in your own words

6          Who is affected by the note in the papers: stockholders, employees, auditors, the community in general? Explain in your own words

For each case study, you will be provided a brief overview, the actual problem, and the steps to follow on Minitab. Each case study will require you to follow the five step hypothesis testing process in addition to providing the computer output AND templated results.

Case Study 1: Applying a Completely Randomized Design (Detecting Changes in Salaries)

That the starting salaries of new accounting graduates would differ according to geographic regions of the United States seems logical. A random selection of accounting firms is taken from three geographic regions, and each is asked to state the starting salary for a new accounting graduate who is going to work in auditing. The data obtained follow. Use a one-way ANOVA to analyze these data. Note that the data can be restated to make the computations more reasonable (example: $42,500 = 4.25). Use a 1% level of significance. Discuss the business implications of your findings. Please provide the 5 steps for both the main effect and the post-hoc test (if required), the Minitab output for each hypothesis test, and state the business implication based upon your analysis. You must use Minitab and the 5 step hypothesis testing process.

South                Northeast                      West

40,500              51,000                          45,500

41,500              49,500                          43,500

40,000              49,000                          45,000

41,000              48,000                          46,500

41,500              49,500                          46,000

APA style:

An one way analysis of variance showed that the effect of noise was significant, F(3,27) = 5.94, p = .007. Post hoc analyses using the Tukey post hoc criterion for significance indicated that the average number of errors was significantly lower in the white noise condition (M = 12.4, SD = 2.26) than in the other two noise conditions (traffic and industrial) combined (M = 13.62, SD = 5.56), F(3, 27) = 7.77, p = .042.

Management skills

Reading with question at the end: answer as if you were at a job interview:

At Tesla, helping others and making a difference is one of our main missions, this is why we wanted to go throught this organizational processs that we went throught, thought a model called the SOAR model:

The first step of the model is the Strength: The main strength of tesla is their engineering expertise: tesla has some of the best and most skilled engineered in the world. They are consistently innovating with the release of new cars almost every year. Another major strength that relates to the article about their production of ventilators is that their production is based in the United States, meaning that they can act and deliver quickly.

Secondly, their main opportunities are what the shareholders are asking for: tesla should focus on the growing demand. Moreover, Tesla can differentiate itself from the competition by showing that it has a moral obligation to shift and produce ventilators to help the American population. This new challenge that tesla is facing could be seen as a great opportunity for the firm.

Reflecting on Strength and opportunity, tesla’s main aspiration is to forge itself as an innovator and leader in the driverless car’s revolution. The company aspires to be able to shift its production by constantly innovating in moments of urgent need such as the Coronavirus. The strategic initiate that tesla put in place to shift its production to ventilators is to adapt the process of building cars into building the medial supply by using car parts.

Finally, considering its strength, opportunity and aspiration, tesla achieved its goal to produce and deliver extremely quickly the ventilators for many hospitals. The best reward for the company is the media coverage that this shift has achieved. This could result in an increased in market share and car sales for tesla.

Question to answer:

1. We wanted to ask you how you can relate to this example in your past experience and how your problem-solving skills could be applied in your role at tesla?

One in five adults is obese in wealthy countries around the world. Unfortunately, in the United States, the rate is about two in five (Organisation for Economic Cooperation and Development [OECD] 2017). Major causes appear to be sweet drinks and added sugars in other products. According to the Centers for Disease Control and Prevention (2017), frequent consumption of sweetened beverages is associated with obesity, heart disease, kidney diseases, cavities, and other diseases. Oddly, despite the obesity epidemic, subsidies for crops that can be refined into sugar- corn, wheat, rice, sorghum, and others-continue. The subsidies reduce the prices of products containing sugars. These products include sodas, sweetened teas, and other products. A number of local governments have enacted taxes on sweetened beverages, but no taxes have passed at the state or federal level. (France and Mexico have passed national taxes.) Paarlberg, Mozaffartian, and Micha (2017) argue that a 17 percent tax on sweetened beverages would reduce consumption by 15 percent.

Discussion Questions

1. What price elasticity does the estimate by Paarlberg, Mozaffartian, and Micha (2017) imply?

2. Can you find another estimate of the price elasticity of demand for sweetened drinks? (look for published work)

3. Is the demand for sweetened drinks elastic or inelastic?

4. Per question (1) above, If the price of sodas rose by 5 percent, how much would sales drop?

5. What are substitutes for sweetened drinks?

6. Can you find an estimate of the cross-price elasticity of demand for sweetened drinks? (look for a published paper)

7. Is water a complement or a substitute for soda? Explain

8. In light of your answer to the previous question, should the cross-price elasticity be positive?

9. Do you favor a tax on sweetened drinks? Why or why not?

10. Do you favor a tax on added sugars, why or why not?

Trophy Fish Company supplies flies and fishing gear to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y6:

The following accounts were unintentionally omitted from the aging schedule:

Trophy Fish has a past history of uncollectible accounts by age category, as follows:

3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.

Research Case:

Sony is a Japanese multinational company that decided to expand its entertainment business in the United States. Sony purchased CBS Records and Columbia Pictures to form Sony Music and Sony Pictures. Because of these acquisitions, Sony assumed debt of $1.2 billion and allocated $3.8 billion to goodwill. On Sony’s Annual Report filed with the SEC, Sony reported only two industry segments: electronics and entertainment. Although Sony Music was profitable, Sony Pictures produced continued losses of approximately $1 billion. When Sony purchased the motion pictures operations, it projected a loss for only five years because it assumed that the motion pictures entertainment would become profitable. However, Sony suffered a significant loss after amortization and the costs of financing the acquisition for the past four years.

In the current year, Sony Pictures sustained a loss of nearly $450 million, double the amount that Sony had planned. To date, Sony Pictures has had total net losses of nearly $1billion. Early in the year, Sony declared that it had written down $2.7 billion in goodwill associated with the acquisition of Sony Pictures. Sony combined the results of Sony Music and Sony Pictures and reported them as Sony Entertainment. Little profit was shown in Sony Entertainment. Sony’s consolidated financial statements did not disclose the losses from Sony Pictures.

Questions

How should the write down of goodwill be reported? What information (if any) should be disclosed related to goodwill?

Since Sony has two businesses with different financial trends, should the consolidated financial statements provide specific segment disclosure information? What should the company disclose?

Reporting insufficient information or excluding required disclosures can be misleading or perceived as unethical. What ethical standards applicable to Sony’s reporting?

Joe’s Supply Company manufactures and sells elbow joints from its only location in New York. The elbow joints are sold throughout the United States and go into homes, houses, apartments, office buildings, hospitals and other buildings. On January 1, 2007 Joe, CEO of Joe’s Supply Company, finds a new supplier for resin to make his elbow joints at a much lower cost. This will make his business competitive with other manufacturers who already have Chinese suppliers. Joe’s R&D director does some preliminary tests on the resin and ultimately, the resin seems satisfactory. On February 1, 2007, Joe’s Supply begins manufacturing his elbow joints with the new resin and selling the newly formulated product over the internet, by mail and with walk-in customers. The elbow joints come with a 2 year limited warranty and a disclaimer about consequential damages.

In June 2008, Joe started to get reports from contractor customers that his elbow joints were leaking and damage to property was occurring. Joe did nothing to investigate these claims. He simply sent the customers a letter with the final results on the resin and told them, they must have installed the elbow joints incorrectly.

Can Joe be sued for the damage caused by the elbow joints? If so, describe the steps that Joe’s customer would have to take to sue Joe.

Can Joe’s customer sue the Chinese Company that made the resin?

If Joe did not want to be sued what other dispute resolution procedures are available to him and what do you think he should do?

If the government brought a criminal case against Joe’s Supply, can the corporation refuse to testify against itself under the 5^th Amendment? Can Joe refuse to testify? Can Joe refuse to hand over internal corporate papers such as the test results? Why?

Program Requirements:

Write a C++ program according to the following requirements:

1.   Open the data file Electricity.txt and read each column into an array (8 arrays total).

2.   Also create 2 arrays for the following:

• Total Fossil Fuel Energy (sum of all fossil fuels)
• Total Renewable Energy (sum of all renewable sources)

Electricity.txt:

Net generation United States all sectors monthly
https://www.eia.gov/electricity/data/browser/
Source: U.S. Energy Information Administration
All values in thousands of megawatthours
Year   all fuels   coal       natural gas   nuclear       hydroelectric   wind       solar
2018   347576.0   95496.8       122393.9   67257.0       24377.0       22720.8       7780.4
2017   336189.2   100486.3   108034.6   67079.1       25027.8       21191.9       6439.7
2016   339722.9   103262.4   114858.9   67141.2       22317.7       18916.0       4572.2
2015   339800.1   112699.8   111123.5   66431.5       20756.7       15893.2       3252.7
2014   341133.8   131809.2   93884.1       66430.5       21613.9       15137.9       2410.3
2013   338830.3   131759.6   93736.3       65751.4       22380.4       13986.6  
2012   337313.8   126170.2   102157.8   64110.9       23020.0       11735.1  
2011   341678.4   144452.5   84474.1       65850.4       26612.9       10014.7  
2010   343755.0   153940.9   82308.1       67247.4       21683.6       7887.7  
2009   329194.2   146325.4   76748.2       66571.2       22787.1       6157.2  
2008   343282.3   165483.4   73581.7       67184.0       21235.9       4613.6  
2007   346395.4   168038.0   74715.8       67202.1       20625.8       2870.8  
2006   338725.2   165875.9   68036.7       65601.6       24103.9       2215.8  
2005   337951.9   167739.4   63413.4       65165.5       22526.8       1484.2  
2004   330879.6   164858.4   59175.0       65710.7       22368.1       1178.6  
2003   323598.8   164478.1   54159.0       63644.4       22983.9       932.3  
2002   321537.7   161094.2   57583.8       65005.3       22027.4       862.9  
2001   311387.0   158663.0   53260.8       64068.9       18080.1       561.4

Stan is an auditor for Cartman & Kenny, CPA. He has recently been assigned to a new private client called Southpark Services, a provider of Web management services. Southpark has clients throughout the United States. The company manages the clients’ Web sites, keeping them up to date, resolving problems, and doing any other programming or troubleshooting that their clients need.

The two Southpark owners are hands-on managers. They, along with three other employees, provide the Web site management services for their clients. Although they don’t have access to their clients’ books or bank accounts, they have the ability to alter the Web site, and any data that flows through the Web site before it goes to the company or the customer. Southpark has one office manager with an undergraduate accounting degree and one full-time bookkeeper.

In discussions with management, Stan learns that Southpark Services “doesn’t bother” to maintain any processes specifically directed toward good internal controls. When Stan asked why, management replied, “internal control is too expensive for us, and since we are not a public company and Section 404 does not apply to us, we don’t see any value internal control can offer our management.”

Required:

(a) Develop a list of concerns that Southpark’s clients might have based on management’s attitude. Classify those concerns into two lists—concerns that affect the business and concerns that might affect their productive output, and thus the client’s business operations. Some of the concerns you identify might end up on both lists.

(b) Suggest processes and controls that Southpark can implement to limit the risk of the items you listed in (a).

(c) How would Stan examine or test each of the processes and controls you list in (b)?

1.

The average price of a gallon of gasoline (regular unleaded) in 1976 was $0.64. In 1998 it was $1.06. The CPI factor in 1976 is 56.9 and the CPI factor in 1998 is 163.0.   Convert the 1976 price to constant 1998 dollars. Was gas more expensive in 1976 or in 1998? Choose two correct answers.

Question 3 options:

2.

In 1989, red delicious apples cost on average $0.57 per pound. In 1998, they cost $0.94 per pound. Were apples more expensive in 1998 or in 1989? The CPI value in 1989 is 124.0 and the CPI value in 1998 is 163.0. Convert the 1989 price to constant 1998 dollars. Were apples more expensive in 1989 or in 1998? Choose two correct answers.

Question 4 options:

3.

In 1948, the President of the United States earned a salary of $75,000. In 2000, the President earned a salary of $400,000. Knowing that the CPI for 1948 is 24.1 and the CPI for 2000 is 172.2, convert the 1948 salary to constant 2000 dollars. When comparing constant dollar amounts, whose salary was worth more--Harry Truman, President in 1948, or Bill Clinton, President in 2000?   Choose two correct answers.

Question 5 options: