ACCT 555 DeVry Entire Course

2. (TCO A) Distinguish between generally accepted auditing standards (GAAS) and generally accepted accounting
principles (GAAP). What professional organization establishes GAAS? What professional organization establishes
GAAP?
3. Assume you are the partner in charge of the audit of Franklin Corporation’s 2002 financial statements. The audit
report has not yet been prepared. In each independent situation following, indicate the appropriate opinion you should
issue and why you would issue that opinion
4. State whether there is any violation of the AICPA Code of Professional Conduct, and the nature of the violation.
Where there is a violation, evaluate the potential legal liability the accountant may face. Justify your position
5. Discuss at least five of the actions that can be taken by individual CPAs, to protect themselves from legal liability
6. (TCO E) Bobby Thigpen, waiter at Relief Stop, has been taking cash from the restaurant. Thigpen prepares a
customer’s check from which the customer pays. Thigpen then destroys the check, and prepares a new one with
different items of lower cost. He presents the new check and indicated amount on the check to the cashier, and saves
the excess cash for himself. Question: Formulate three internal control features that the restaurant could implement, to
eliminate this defalcation
7. Three types of legal documents and records that auditors examine in the planning phase of an audit are the
corporate charter and bylaws, corporate minutes of meetings of the board of directors and stockholders, and contracts.
Discuss the audit-relevant information contained in each of these three types of documents that an auditor should be
aware of early in the audit.
8. (TCO F) What are specific audit objectives? Explain their relationship to the general audit objectives. (Points: 25)
2.(TCO H) Explain why it is necessary to allocate the preliminary judgment about materiality to individual accounts
(segments) in the financial statements. Also explain why allocating to balance sheet accounts is more common than
allocating to income statement accounts. (Points: 25)
Allocating the preliminary judgment about materiality to individual segments is necessary because evidence is
accumulated for segments rather than for the financial statements as a whole. Allocating to segments establishes a
tolerable misstatement amount for each segment, which helps the auditor decide the appropriate audit evidence to
accumulate for each segment. Most practitioners allocate materiality to balance sheet accounts rather than income
statement accounts because there are fewer balance sheet than income statement accounts
3. (TCO I) For each of the following potential misstatements, provide one potential audit test that could be used to
detect the misstatement
4. (TCO I) Describe how the auditor tests the classification objective for accounts receivable. (Points: 25)
The classification objective is tested by reviewing the aged trial balance for material receivables from affiliates, officers,
directors, or other related parties. If notes receivable or accounts that should not be classified as a current asset are
included with the regular accounts, these should also be segregated. Finally, if credit balances in accounts receivable
are significant, it is appropriate to reclassify them as accounts payable
5. The design of tests of details of balances for inventory is affected by audit results from multiple cycles. Identify
the cycles, other than the inventory and warehousing cycle, that affect the audit of inventory
6. Describe three computer auditing techniques available to the auditor
7. (TCO K) Match seven of the terms (a-p) with the description/definitions provided below (1-7):