Hello,I have the following assignment which is a continuation from the previous assignment I...

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Hello,I have the following assignment which is a continuation from the previous assignment I received help from Trans Tuturs on. I would like to have the same instructor I had the last time, as I was able to understand all of his break-downs, and assumptions. He presented a very clear, not over wordy assignment, that I could review and understand. The new assignment is as follows:·Auditing Case Study	Review this auditing case studyand then respond to the following questions in two essays that address the specific questions posed. For 11B-3, in addition to required parts a and b, prepare working papers that identify the five exceptions in a table, determine the accounts audited value, and determine if the variances are acceptable.Assume that you have been assigned to the audit of Keystone after audit planning has occurred. Review the planning information on pages 237- 244 and the audit program for the accounts receivable and revenue (8-6 on pages 493-494). The manager on the engagement has given you the task of reviewing the monthly revenue report on page 496 (B-1 I).1.Based on your review of the report, describe any unusual relationships that might indicate a risk of misstatement of revenues based on your knowledge of the company derived from a review of the information on pages 237- 244.2.Identify any procedures on the audit program tor receivables and revenue that might address the risk(s) identified in	(a).3.Design two other procedures that would address the risk(s) identified in	(0).Keystone Computers & Networks, Inc. (KCN), has 933 accounts receivable, with a total book value of $1 0,235,457. From that population, Adams, Barnes & Co. (ABC), CPAs, selected a sample of 260 accounts (142 unique accounts) for confirmation for the year ended December 31, 20X5, as illustrated by the working paper on page 495. First and second confirmation requests resulted in replies for all but 10 of those accounts. ABC performed alternative procedures on those 10 accounts and noted no exceptions. Of the replies, 5 had exceptions as described below (with ABC follow-up):4."The balance of $120,000 is incorrect because we paid that amount in full on December 31. 20X5."	Follow-up: An analysis of the cash receipts journal revealed that the check had been received in the mail on January 9, 20X6.5."Of the balance of $30,000, $330 is incorrect because on December 19 we returned a printer to Keystone when we found that we didn't need it. We ordered it in the middle of November when we had anticipated a need for it. When we received the printer, we realized it was unnecessary and returned it unopened."	Follow-up: An analysis of the transaction revealed that it was received by Keystone on December 31, 20X5, and that the adjustment to the account had been processed on January 2, 20X6.6."The balance of $214,000 is correct, and we paid it on January 5, 19X6."	Follow-up: An analysis of the cash receipts journal revealed that the check had been received on January 10, 20X6.7."Of the balance of $130,000, $10,000 is incorrect because it represents goods that we didn't receive until January 5, 20X6."	Follow-up: Inspection of shipping records reveals that the item was shipped on January 3, 20X6.8."Of the account's $18,000 balance, we paid $17,460 and the $540 (3 percent of the total) remains unpaid because the Keystone salesperson told us that she would be able to obtain a 'special' discount beyond the normal."	Follow-up: While inspection of the sales agreement indicated no such discoullt arrangement, discussions with Loren Steele (controller) and Sam Best (president) indicated that the salesperson had inappropriately granted such a discount to the client. On January 15, 20X6, they processed the discount and credited the account for $540.1.For each of the five exceptions, determine the account's proper "audited value."2.Use the probability-proportional-to-size method with your analysis from part	(a)to evaluate your sample's results. The risk of incorrect acceptance is 5 percent.Your essays should total 4-6 pages in length and be well written and in APA format.

Robert · Accepted Answer

6-1 
Keystone Computer & Networks, Inc (KCN) 
6C-1 SOLUTION:  KCN Analysis of Audit Strategy  
Section Purpose Content 
OBJECTIVES OF THE 
ENGAGEMENT 
To describe the services 
that is to be rendered to 
the client. 
The objectives are (1) audit of KCN's financial 
statements for the year ended 12/31/X5, and 
(2) issuance of a letter on compliance with 
covenants of the client's letter of credit 
agreement. 
BUSINESS AND INDUSTRY 
CONDITIONS 
To describe the nature of 
KCN's business and 
industry. 
KCN sells and services micro-computers, 
networking hardware and software to business 
customers.  The industry is sensitive to 
economic conditions and very competitive, 
with KCN competing with companies much 
larger than itself.  KCN’s long-term success 
depends on its ability to attract and retain 
qualified information technology personnel.  
The annual growth in spending for information 
technology products and services is expected to 
be 6% per year for the next three years. 
PLANNING MEETINGS To indicate meetings held 
with client and with CPA 
engagement team.  
At this point, one meeting has been held with 
client personnel and one with the engagement 
team. 
OWNERSHIP AND 
MANAGEMENT 
To describe the owners 
and management of the 
company. 
KCN is privately owned by Terry Keystone, 
Mark Keystone, John Keystone, Keith Young, 
and Rita Young. 
Terry and Mark Keystone participate in 
management. 
OBJECTIVES, STRATEGIES 
AND BUSINESS RISKS 
To describe KCN’s business 
objectives, major 
strategies and the risks 
related to achieving its 
objectives.  
The major objective of KNC is to increase 
revenues by 10% and increase net income by 
12% for each of the next 3 years.  Major 
strategies include: (1) aggressive advertising, 
(2) sales to customers with higher risk profiles, 
and (3) new software development.  The 
primary risks include (1) advertising may not 
create the desired results, (2) credit losses may 
exceed benefits of increased sales, and 
software development activities may not 
6-2 
produce products. 
MEASUREMENT AND 
REVIEW OF FINANCIAL 
PERFORMANCE 
Describes the methods 
used by management to 
monitor performance. 
Measures used to monitor performance 
include:  (1) inventory and receivables 
turnover, (2) aging of accounts receivable, (3) 
sales and gross margins by type of revenue, (4) 
net income, and the total inventory balance. 
PROCEDURES TO OBTAIN AN 
UNDERSTANDING OF THE 
CLIENT AND ITS 
ENVIRONMENT  
Describes the procedures 
used by the auditors to 
obtain an understanding 
of the client and its 
environment. 
The procedures used include (1) review of 
information from the prior-year’s audit, (2) 
Inquiries of management, (3) reading board 
minutes, (4) review of monthly performance 
reports, (5) review of industry reports, review 
of the company’s website, and (6) review of 
articles in the Wall Street Journal. 
AUDIT APPROACH To describe the overall 
approach to be taken on 
the audit. 
Consistent with the previous year's audit, the 
CPAs will plan to perform tests of controls to 
assess control risk at less than the maximum 
for most assertions.  
SIGNIFICANT RISKS To describe the significant 
risks identified by the 
auditors. 
Two significant risks were identified: (1) KCN 
has engaged in a strategy to sell to customers 
with higher credit risk, and (2) the officers of 
the company receive significant bonuses based 
on quarterly results. 
SIGNIFICANT ACCOUNTING 
AND AUDITING MATTERS 
To describe particular 
accounting and auditing 
matters of concern. 
Two particular concerns exist: (1) proper 
accounting for extended warranties and (2) 
capitalization of software costs. 
PLANNING MATERIALITY To identify an amount to 
be used as a measure for 
planning materiality.  
Based on an analysis of sales, total assets, and 
pretax net income, an amount of $70,000 will 
be used as a measure of planning materiality. 
SCHEDULING AND STAFFING 
PLAN 
To provide the schedule 
for major portions of the 
audit, and the staffing 
requirements for the 
engagement.  
The section includes major dates beginning 
with interim audit work through the issuance of 
an updated management letter.  A total of 118 
hours are budgeted for the audit.
6-3 
6C-2 SOLUTION:  KCN Risks  
       Risk    Implications and Response 
1. KNC has engaged in a 
strategy to sell to 
customers with higher 
credit risk.

Hello, I have the following assignment which is a continuation from the previous assignment I received help from Trans Tuturs on. I would like to have the same instructor I had the last time, as I was...

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