Explain how risk of material misstatement should he assessed and what effect that assessment will have on detection risk for the following audit client: Kistra Corporationis one of several companies engaged in the manufacture of high- speed, high- capacity data storage devices. The industry is very competitive and subject to quick changes in technology. Kistra’s operating results would place the company in the second quartile in terms of profitability and financial position. The company has never been the leader in the industry, with its products typically slightly behind the industry leaders in terms of performance.

Explain how risk of material misstatement should he assessed and what effect that assessment will have on detection risk for the following audit client: Kistra Corporationis one of several companies engaged in the manufacture of high- speed, high- capacity data storage devices. The industry is very competitive and subject to quick changes in technology. Kistra’s operating results would place the company in the second quartile in terms of profitability and financial position. The company has never been the leader in the industry, with its products typically slightly behind the industry leaders in terms of performance.

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter4: Ethical Responsibilities Of Accountants

Section4.8: Dell Inc.

Problem 3Q

See similar textbooks

Similar questions

Explain how risk of material misstatement should he assessed and what effect that assessment will have on detection risk for the following audit client:xyz Corporationis one of several companies engaged in the manufacture of high- speed, high- capacity data storage devices. The industry is very competitive and subject to quick changes in technology. MUHEET’s operating results would place the company in the second quartile in terms of profitability and financial position. The company has never been the leader in the industry, with its products typically slightly behind the industry leaders in terms of performance.
Carinal Ltd. specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2022. You have been presented with the following draft financial information about Carinal with incomplete ratios and percentages calculation. INCOME STATEMENT Year ended June 30 2022 2021 $'000 $'000Revenue 22450 18675Cost of sales 8475 8055Gross Profit 13975 10620Distribution costs 4245 3120Administrative expenses 1276 2134Selling expenses 5555 512Profit from operations 2899 4854Net interest receivable 1245 495Profit before tax 4144 5349Income tax expense 2145 2345Net profit 1999 3004Retained profits 1325 2105Dividends paid $1250 $1049Accounting ratios and…
Carinal Ltd. specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2022. You have been presented with the following draft financial information about Carinal with incomplete ratios and percentages calculation. INCOME STATEMENT Year ended June 30 2022 2021 $'000 $'000 Revenue 22,450 18,675 Cost of Sales 8,475 8,055 Gross Profit 13,975 10,620 Distribution costs 4,245 3,120 Administrative expenses 1,276 2,134 Selling expenses 5,555 512 Profit from operations 2,899 4,854 Net interest receivable 1,245 495 Profit before tax 4,144 5,349 Income tax expenses 2,145 2,345 Net profit 1,999 3,004 Retained…
Carinal Ltd. specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2022. You have been presented with the following draft financial information about Carinal with incomplete ratios and percentages calculation. INCOME STATEMENT Year ended June 30 2022 2021 $'000 $'000 Revenue Cost of sales 22450 18675 8475 8055 Gross Profit 13975 10620 Distribution costs 4245 3120 Administrative expenses 1276 2134 Selling expenses 5555 512 Profit from operations 2899 4854 Net interest receivable 1245 495 Profit before tax 4144 5349 Income tax expense 2145 2345 Net profit 1999 3004 Retained profits 1325 2105 Dividends paid $1250 $1049
Carinal Ltd. specializes in the development of electronic components within quite a competitive environment causing concerns for marketing and pricing. Its non-current assets primarily include IT software, property, and investments, and there have been additions to these during the year. As audit manager, you are conducting a preliminary analytical review and associated risk analysis for this client for the year ended June 30 2022. You have been presented with the following draft financial information about Carinal with incomplete ratios and percentages calculation. INCOME STATEMENT Year ended June 30 2022 2021 $'000 $'000 Revenue 22,450 18,675 Cost of Sales 8,475 8,055 Gross Profit 13,975 10,620 Distribution costs 4,245 3,120 Administrative expenses 1,276 2,134 Selling expenses 5,555 512 Profit from operations 2,899 4,854 Net interest receivable 1,245 495 Profit before tax 4,144 5,349 Income tax expenses 2,145 2,345 Net profit 1,999 3,004 Retained…
You have been presented with the following draft financial information about Bata Ltd, a very successful company that develops and licenses specialist computer software and hardware. Its noncurrent assets mainly consist of property, computer hardware and investments, and there have been additions to these during the year. The company is experiencing increasing competition from rival companies, most of which specialize in hardware or software, but not both. There is pressure to advertise and to cut prices. You are the audit manager. You are planning the audit and are conducting a preliminary analytical review and associated risk analysis for this client for the year ended 31 July 2019. You have been provided with a summarized draft income statement which has been produced very quickly and certain accounting ratios and percentages. You have been informed that the company accounts for research and development costs in accordance with IAS 38 Intangible Assets. Required: (i) Based on the…
You are currently planning the audit of ABC company. You have audited ABC for the previous five years. ABC is a technology company that is currently going through an IPO. Because of its inexperience complying with SOX 404 requirements, ABC still has very poor internal controls overall, although controls for sales are strong and have been found to operate effectively during interim testing. Most of its accounting procedures involve complex accounting and the heavy use of estimates. ABC is frequently featured in the financial press. Pre-tax income for the current year under audit is $10,000,000. ABC's largest and most challenging account balances are sales revenue ($143,000,000) and research and development expense ($25,000,000). Based on the information above, tolerable misstatement/performance materiality for R&D expense would be: 50% of overall/planning materiality 75% of overall/planning materiality 50% of the R&D account balance 75% of the R&D account balance Based on the…
Regarding Murphy Ltd: Three (3) account areas that are at risk of material misstatement. For each account area identified above, one (1) key assertion that could be at risk. The audit procedures you would perform to gather sufficient appropriate evidence for each assertion Murphy Ltd Finally, Wayne tells you about Murphy Ltd, a large client with a diverse set of operations. During Wayne’s audit of Murphy he found the following: Murphy manufactures wheat, yeast and various other goods needed to bake bread which it exports to bakers in Saudi Arabia. Recently the Saudi Arabian currency (Saudi riyal) has fallen in value and a number of Murphy’s customers are unable to settle their accounts. By the end of the year, Murphy is expecting to have outstanding receivables in excess of $1 million. Murphy also manufactures soft drink. Part of Murphy’s agreement with its distributors is that Murphy will supply fridges and advertising signs for the distributors to use. These fridges are rented to…
A risk in using “risk-based auditing” is that if the auditor applies a wrong rating in assessing particular risks, sufficient audit evidence may not be obtained to provide reasonable assurance on those areas. Using the scenario outlined below: ABC Ltd.’s principal business activity is the assembly of circuit boards. One of the key materials used is copper wiring, all of which is imported. As a cost-cutting measure, a contract with a new overseas supplier was signed, and all of the company’s copper wiring is now supplied under this contract. Purchases are denominated in a foreign currency, but the company does not use forward exchange contracts in relation to its imports of copper wiring. The company has two production facilities, one of which produces goods for the export market, and the other produces goods for the domestic market. About half of its goods are exported, but the export market is suffering due to competition from cheaper producers overseas. Most domestic sales are made…
LetGrade SAOG has been audited by the same auditor for over 10 years and the auditor regularly plays football with the CEO and CFO of LetGrade SAOG. The auditor may have become well known with the client(LetGrade SAOG) and, thus, lack objectivity in their work.Which threat may occur in this case Familiarity threats Self-review threats Self-interest threats Advocacy threats
The manager Concerned about her current customer base, manager Andersen started to think of factors that might affect the attractiveness of an auditing firm. Of course, the service quality provided and the fees charged by the auditor seem two important factors. Next, she decides that the reputation of the auditing firm also needs to be included in the framework as an independent variable. As illustrated by the dramatic effects of recent auditing scandals, reputation seems especially important for large auditors (i.e., auditing firms that are large in size). Finally, manager Andersen also thinks that the proximity of the auditing firm to the customer is another variable to be included as an independent variable. Proximity very likely affects the possibility for the client to personally meet with the auditors on a regular basis and she knows from her own contact with customers that they perceive personal interactions as quite important. Required: Identify variables (IV, DV, Moderating…
LetGrade SAOG has been audited by the same auditor for over 10 years and the auditor regularly plays football with the CEO and CFO of LetGrade SAOG. The auditor may have become well known with the client(LetGrade SAOG) and, thus, lack objectivity in their work.Which threat may occur in this case Familiarity threats Self-interest threats Self-review threats Advocacy threats