The Lakeside Company:
Auditing Cases
SOLUTIONS MANUAL 12e
Table of Contents
John M. Trussel and J. Douglas Frazer
A Note on Ethics, Fraud and SOX Questions 2
A Note on Research Assignments 3
Introductory Case 5
Case 1 14
Case 2 22
Case 3 33
Case 4 44
,Case 5 58
Case 6 74
Case 7 82
Case 8 92
Case 9 101
Case 10 110
Case 11 116
Case 12 125
Case 13 136
, A NOTE ON ETHICS, FRAUD, AND SOX QUESTIONS
The Lakeside Company: Auditing Cases, 12th edition, has been updated in light of the
accounting scandals of the early 2000s, the passage of the Sarbanes-Oxley Act of
2002, and the renewed interest in ethics within the accounting and auditing
profession.
Sarbanes-Oxley issues have been incorporated in two ways. First, case content has
been altered to include Lakeside’s consideration of financing expansion through an
initial public offering, and the resulting impact such a decision would have on
Lakeside and on Abernathy and Chapman, CPAs. Second, the discussion questions
and exercises have been expanded to include consideration of Sarbanes-Oxley and
new auditing and independence standards, both by adding a section in the end-of-
chapter material and by reference in the other questions where appropriate.
Ethics questions are now specifically identified with an ethics logo. The ethics
questions are often open ended, and this solutions manual does not try to give exact
answers to these questions. Rather, we intend to give some ideas for classroom
discussion, and to help with student research on these questions.
Fra
Fraud questions are now specifically identified with a fraud triangle.
ud
, A NOTE ON RESEARCH ASSIGNMENTS
The "Apply Your Research" and "Consulting Partner Review" assignments included at
the end of several cases do not lend themselves to definitive solutions that could be
included in an instructor's manual. The assignments are simply not intended to be
exercises in arriving at a predetermined answer. Rather, the applications of the
suggested readings have the following objectives:
- To provide a means for improving the writing skills of students. From all reports,
accounting majors too often leave college lacking in the basic ability to compose
and construct sentences and paragraphs. Accounting and auditing (especially as
one moves up in an organization) obviously require skills other than the purely
quantitative. Memos, reports, footnotes, audit and accounting guides, etc., all
require accountants and auditors to be effective communicators of the written
word. Indeed, the instructor may want to team up with a member of the school's
English or communications department to enhance the effectiveness of these
assignments. The auditing instructor can then evaluate the technical and
research portions of the assignment, while the English instructor would make
suggestions as to grammar, syntax, construction of sentences and paragraphs,
logic of the thought process, etc. As a preliminary step, the instructor may want
to assign articles such as "Word Crunching: A Primer for Accountants" from the
March 1990 issue of the Journal of Accountancy.
- To introduce students to accounting and business journals as well as other
important publications. After college, students must be able to "keep current" or
their effectiveness will quickly decline. In most cases, this continuation of their
education is provided by the regular reading of publications such as The Wall
Street Journal, Journal of Accountancy, CPA Journal, and Forbes. These
assignments require the students to begin reading these journals prior to
graduation. The students should become comfortable with their ability to
understand and use the materials in professional publications. In addition, real-
world aspects of many accounting issues are presented through these various
readings.
- To develop the students' ability to derive viable solutions to auditing problems.
Auditing Cases
SOLUTIONS MANUAL 12e
Table of Contents
John M. Trussel and J. Douglas Frazer
A Note on Ethics, Fraud and SOX Questions 2
A Note on Research Assignments 3
Introductory Case 5
Case 1 14
Case 2 22
Case 3 33
Case 4 44
,Case 5 58
Case 6 74
Case 7 82
Case 8 92
Case 9 101
Case 10 110
Case 11 116
Case 12 125
Case 13 136
, A NOTE ON ETHICS, FRAUD, AND SOX QUESTIONS
The Lakeside Company: Auditing Cases, 12th edition, has been updated in light of the
accounting scandals of the early 2000s, the passage of the Sarbanes-Oxley Act of
2002, and the renewed interest in ethics within the accounting and auditing
profession.
Sarbanes-Oxley issues have been incorporated in two ways. First, case content has
been altered to include Lakeside’s consideration of financing expansion through an
initial public offering, and the resulting impact such a decision would have on
Lakeside and on Abernathy and Chapman, CPAs. Second, the discussion questions
and exercises have been expanded to include consideration of Sarbanes-Oxley and
new auditing and independence standards, both by adding a section in the end-of-
chapter material and by reference in the other questions where appropriate.
Ethics questions are now specifically identified with an ethics logo. The ethics
questions are often open ended, and this solutions manual does not try to give exact
answers to these questions. Rather, we intend to give some ideas for classroom
discussion, and to help with student research on these questions.
Fra
Fraud questions are now specifically identified with a fraud triangle.
ud
, A NOTE ON RESEARCH ASSIGNMENTS
The "Apply Your Research" and "Consulting Partner Review" assignments included at
the end of several cases do not lend themselves to definitive solutions that could be
included in an instructor's manual. The assignments are simply not intended to be
exercises in arriving at a predetermined answer. Rather, the applications of the
suggested readings have the following objectives:
- To provide a means for improving the writing skills of students. From all reports,
accounting majors too often leave college lacking in the basic ability to compose
and construct sentences and paragraphs. Accounting and auditing (especially as
one moves up in an organization) obviously require skills other than the purely
quantitative. Memos, reports, footnotes, audit and accounting guides, etc., all
require accountants and auditors to be effective communicators of the written
word. Indeed, the instructor may want to team up with a member of the school's
English or communications department to enhance the effectiveness of these
assignments. The auditing instructor can then evaluate the technical and
research portions of the assignment, while the English instructor would make
suggestions as to grammar, syntax, construction of sentences and paragraphs,
logic of the thought process, etc. As a preliminary step, the instructor may want
to assign articles such as "Word Crunching: A Primer for Accountants" from the
March 1990 issue of the Journal of Accountancy.
- To introduce students to accounting and business journals as well as other
important publications. After college, students must be able to "keep current" or
their effectiveness will quickly decline. In most cases, this continuation of their
education is provided by the regular reading of publications such as The Wall
Street Journal, Journal of Accountancy, CPA Journal, and Forbes. These
assignments require the students to begin reading these journals prior to
graduation. The students should become comfortable with their ability to
understand and use the materials in professional publications. In addition, real-
world aspects of many accounting issues are presented through these various
readings.
- To develop the students' ability to derive viable solutions to auditing problems.
