ACCT460-1204A-01 Professional Accounting AssignmentName: Unit 3 Individual Project Deliverable Length: 500–1,000 words Details: The BakFirn Corporation, a publicly traded firm, has contracted with...

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ACCT460-1204A-01 Professional Accounting
AssignmentName:Unit 3 Individual Project
Deliverable Length:500–1,000 words
Details:The BakFirn Corporation, a publicly traded firm, has contracted with YOUCPA,your public accounting firm, for an audit. The BakFirn Corporation manufactures specialty construction tools. The tools are used in the unique construction of homes, warehouses, and multiunit dwellings. The prices range from $1,000 to $5,000 per unit.
During the audit, the audit team has determined the risk assessment of the client. Consequently, the audit has to respond to the assessed risks of material misstatement at the financial statement and assertion levels. The YOUCPA audit team has asked you, the auditor, to prepare a list of actions that you will take to assess the audit risk.
The following information is available in the year just finished:

  • The BakFirn Corporation end-of-year is 12/31/20XX.

  • Sales for the previous year were $10,000,000. Sales this year are coming in at $9,500,000.

  • The firm is in the construction machine industry, making specialty tools.

  • Account receivable days sales outstanding (DSO) has been averaging 90–120 days. The year before, it was80–90 days.

  • Inventory turns have decreased from 3 to 2 per year.

  • Account receivable and inventory make up 80% of total assets.

  • Internal auditing has been reduced by one person to reduce costs.

  • An initial test of controls in cash receipt indicated a lack of following procedures.

  • The construction industry is in the third year of a downturn. It is forecasted to last two more years.

  • The audit team has defined materiality to be focused on account receivable and inventory with $3,000 being the initial threshold. Net income for last year was $1,000,000.

  • Inventory at the end of the year was $2,500,000.

  • Account receivable at the end of the year was $2,740,000, or 100 DSO.

  • The previous auditors did not disclose any fraud or any management issues at the meeting with BakFirn and YOUCPA. The reason for the auditor change was explained as a costs reduction program.


Assignment Guidelines:


  1. Audit Assessment Steps:

    1. What is the initial audit risk? High, medium or low?

    2. What factors made you decide on this level?




  2. Audit Plan Assertions

    1. What would you include in the audit plan, and why?

    2. Would you plan a test of controls or substantive tests? Why or why not?

    3. Would these tests make a difference in the nature, timing, and extent of audit procedures? If so, how?




  3. Audit Plan Evidence

    1. Would you plan to put reliance on prior-year evidence? Why, or why not?

    2. Would your evidence come from observation, analytical procedures, or other means? Explain your reasoning.

    3. Would the evidence prove or disprove an assertion on the reliance of a specific balance sheet account or financial statement account? Explain your reasoning.





Grading Criteria


34%


17%What is the initial audit risk? High, medium or low?

17%What factors made you decide on this level?

33%


11%What would you include in the audit plan, and why?

11%Would you plan a test of controls or substantive tests? Why, or why not?

11%Would these tests make a difference in the nature, timing, and extent of audit procedures? If so, how?

33%


11%Would you plan to put reliance on prior-year evidence? Why, or why not?

11%Would your evidence come from observation, analytical procedures, or other means? Explain your reasoning.

11%Would the evidence prove or disprove an assertion on the reliance of a specific balance sheet account or financial statement account? Explain your reasoning.







Objective:? Develop a thorough understanding of accounting standards and principles.
? Fulfill the core accounting educational requirement to sit for the CPA exam.
? Prepare to practice in public and private accounting position.
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Answered Same DayDec 23, 2021

Answer To: ACCT460-1204A-01 Professional Accounting AssignmentName: Unit 3 Individual Project Deliverable...

David answered on Dec 23 2021
124 Votes
APA Format 6th Edition Template
Running head: PROFESSIONAL ACCOUNTING AND AUDITING 1
Professional accounting and auditing
Name of Student
Name of university
Professional Accounting and Auditing
Introduction
YOUCPA has recently joined Bakfirn as the auditors, as a matter of ethical behavior every incoming auditor has to communicate with the retiring auditor and ask certain questions regarding the organization. YOUCPA has asked the previous auditors in the meeting about any suspicious activities or fraud in the Bakfirn but they did not disclose any fraud or management issue in the meeting.
Auditing Assessment Steps
What is the initial audit risk? High, Medium or Low?
As YOUCPA has recently joined Bakfirn therefore it is necessary for it to conduct risk assessment procedures. Internal audit risk is one of the risks which companies face, internal audit risk is the risk that internal audit department is not capable to conduct the audit properly and due to this the risk of the statuary auditor increases. Risk can be classified in three forms high, medium and low. High risk means that there is more chance of unfavorable events such as frauds in the organization; medium risk means that chances of unfavorable events are probable and low risk means that the chances of unfavorable event in the organizations are very less.
What factors made you decide on this level?
There are various factors which help us in determining the level of risk such as identifying internal controls, closing procedures, information technology environment etc.
Audit Plan Assertions
What would you include in the audit plan and why?
In audit planning auditor should include the following aspects: Gaining an understanding of the client; Identifying significant accounts and transactions; Set planning materiality; Identifying what can go wrong; Gain an understanding of key internal controls and Develop an audit strategy.
All the above mentioned aspects are included in an audit planning to make it successful; if any one step is missed or not performed carefully the whole audit will be useless. Understanding internal controls is one of the most important works done by...
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