ACCT 555 555 GRADING SUMMARY MIDTERM PART 2

ACCT 555 555 GRADING SUMMARY MIDTERM PART 2 These are the automatically computed results of your exam. Date Taken: 1/31/2016 Grades for essay questions, and Time Spent: 1 h , 40 min , 36 secs comments from your instructor, are Points Received: 183 / 200 (91.5%) in the "Details" section below. Page: 1 2 Question 1. Question : (TCO A) Match the following definitions to the appropriate terms. Student Answer: : Standards of » 2 : Sufficient understanding of internal 2 control fieldwork : General standards » 1 : Due professional care 1 : Standards of » 3 : Adequacy of informative disclosures 3 reporting Points Received: 5 of 5 Comments: Question 2. Question : (TCO B) The following is a portion of a qualified audit report issued for a private company. To the shareholders of Tamarak Corporation, We have audited the accompanying balance sheet of Tamarak Corporation as of October 31, 2009, and the related statements of income, retained earnings, and cash flows for the past year. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The company has included in property and debt in the accompanying balance sheet certain lease obligations that, in our opinion, should be expensed in order to conform with generally accepted accounting principles. If these lease obligations were capitalized, property would be decreased by $4,000,000, long-term debt by $2,000,000, and retained earnings by $180,000 as of October 31, 2009, and net income and earnings per share would be decreased by $180,000 and $0.62, respectively, for the past year. Required: Complete the above qualified audit report by preparing the opinion paragraph. Do not date or sign the report. Student Answer: In our opinion, except for the effects of capitalizing lease obligations, as conversed in the previous section, the financial statements referred to above are present fairly and honestly, in all material respects, the financial position of Tamarak Corporation as of October 31, 2009, and these results of its operations and its cash flows for the past year follow generally accepted accounting principles. Instructor See Chapter 3, page 61. Explanation: In our opinion, except for the effects of capitalizing lease obligations, as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Tamarak Corporation as of October 31, 2009, and the results of its operations and its cash flows for the past year in conformity with generally accepted accounting principles. Points Received: 20 of 20 Comments: Question 3. Question : (TCO C) The following situation involves a possible violation of the AICPA's code of professional conduct. For this situation, (1) determine the applicable rule number from the code, (2) decide whether or not the code has been violated, and (3) briefly explain how the situation violates (or does not violate) the code. Your answer should be set up something like this: Rule # Violation? Yes or No. Provide a one- or two-line explanation. Auditor Tex Gato of the CPA firm Smackey and Smackey, CPAs, enjoyed auditing his favorite client, Super Pup Dog Food, because the client would allow him to take home to his dog a variety of dog food samples that amounted to a year's worth of dog food. Student Answer: Rule # 102 Violation? Yes Reason: A year's worth of dog food is not just a small sample that is negligible in value. The audit basically gives him free dog food for the year between audits. This is a conflict of interest in that the client is subsidizing the auditor and so the auditor may feel reluctant to irritate the client and cut off the doggie supplies. This could reduce his objectivity towards the audit. Instructor See Chapter 4, page 95. Explanation: This is a violation of Rule #102, integrity and objectivity. The auditor is receiving more than a gratuitous gift ($25 or less) , and his objectivity and integrity are impaired. Points Received: 10 of 10 Comments: