Docstoc
EXCLUSIVE OFFER FOR DOCSTOC USERS
Try the all-new QuickBooks Online for FREE.  No credit card required.

sol_IA

Document Sample
sol_IA Powered By Docstoc
					   SOLUTIONS TO INTERNET ASSIGNMENTS
Chapter 1
1. There are numerous Internet sites that contain accounting information. Following are
   some suggested sites:
 The CICA's website (www.cica.ca) contains extensive information on the
  organization's activities. For example, it contains the entire report of the Special
  Committee on Assurance Services and a listing of the current status of all outstanding
  exposure drafts.
 The Rutger's Accounting Web's Accounting Resources on the Internet
  (www.rutgers..edu/Accounting/raw/) contains numerous links, including professional
  organizations, accounting journals, and education sites.
 The Association of Certified Fraud Examiners (www.acfe.org) website contains
  extensive information on the Association’s certification as Certified Fraud Examiners
  (CFE).
 The Institute of Internal Auditors (www.theiia.org) website contains detailed
  information on internal auditing.
 The International Federation of Accountants (www.ifac.org) website provides
  detailed information on international accounting and auditing standards.
 The SEC’s Edgar Web site (www.sec.gov) contains all filings by public companies
  with the SEC. It also contains information on other activities by the SEC.
 The major public accounting firms and many smaller firms also maintain good
  informative websites.

2. The Special Committee on Assurance Services proposed a number of assurance
   services that offer significant opportunities for increased revenues for auditors. For
   example, the CICA's website (www.cica.ca) contains detailed information on the
   following services:
           Risk assessment. Assurance that the entity’s profile of business risks is
              comprehensive and evaluates whether the entity has appropriate systems in
              place to effectively manage those risks.
           Business performance measurement. Assurance that an entity’s
              performance measurement system contains relevant and reliable measures
              for assessing the degree to which the entity’s goals and objectives are
              achieved or how its performance compares to competitors.
           Information system reliability. Assurance that an entity’s internal
              information systems provide reliable information for operating and
              financial decisions.
           Electronic commerce. Assurance that systems and tools used in e-
              commerce provide appropriate data integrity, security, privacy, and
              reliability.
           ElderCare. Assurance that specified goals regarding the elderly are being
              met by various caregivers.

          In the U.S., the Elliott Committee also identified seven other opportunities
          where assurance services might be appropriate: corporate policy compliance,
          providing internal auditing services, trading partner accountability, mergers
          and acquisitions, ISO 9000 certification, investment managers’ compliance
          with Association of Investment Management and Research Performance
          Presentation Standards, and World Wide Web assertions.

   3. Molson Brewery's website contains links to a great deal of financial and
      nonfinancial information that might be useful to investors. For example, the home
      page has an investors relations link that contains information on Molson's stock;
      financial statements and analysis; and its social responsibility. The website also
      has a link entitled "press room" that features press releases, and executive
      information.

  4. A search of the Internet identified a number of potential sources for information on
     the mail order industry:
          The National Mail Order Association (www.nmoa.com) is one site where
            small- to medium-sized organizations can go to get information on
            education, ideas, resources, and contacts.
          Pegasus Research International, LLC (www.pegasusri.com) maintains a
            website that contains statistics on e-commerce and the Internet.
          The National Retail Federation (www.nrf.com) maintains historical retail
            statistics.
          The International Society for Strategic Marketing (www.issm.org)
            maintains a site that contains economics statistics from the Census Bureau
            on various SIC codes related to the mail order industry.
          Lastly, a number of the major public accounting firms specialize in the
            retail industry. Their websites contain information on the retail industry.

Chapter 2
1. EarthWear Clothiers' home page contains a number of different types of information
   about the company. This includes background information on the company and its
   annual report.

2. Willis & Adams' home page contains various information on EarthWear including
   selected audited information. The home page also contains various information on
   the mail order industry and selected ratios for EarthWear's competitors.

3. a. Rogers’ home page contains the link “investor info” which contains extensive
    amounts of financial and nonfinancial information that might be useful to investors.
    For example, there is information on Rogers’ stock, financial statements and analysis,
    management commentary, etc. The non-financial information consists of such things
    as press releases and executive information.
        Microsoft's home page contains similar information. The investor relations link
contains the annual report, earnings releases, SEC filings and stock information. It also
contains information on investments, acquisitions, speeches, and events. Microsoft also
maintains an analysis tools link that allows users to download and manipulate financial
information using Excel. It even allows a "what-if" financial model.
b. The auditor's report for BMW contains one paragraph:

   "The Consolidated Financial Statements, which we have audited in
   accordance with professional standards, comply with the German legal
   provisions. The Consolidated Financial Statements present, in compliance
   with required accounting principles, a true and fair view of the Group's assets,
   liabilities, financial position and net income. The Group's Economic Review
   is consistent with the Consolidated Financial Statements."

c. The most common type of audit report in Canada is the standard unqualified
   audit report. Regardless of the auditor, the following seven parts of the audit
   report remain the same: (1) report title, (2) report address, (3) introductory
   paragraph, (4) scope paragraph, (5) opinion paragraph, (6) name of CPA firm,
   and (7) audit report date. The major differences between the Canadian audit
   report and audit reports issued in Germany are discussed by reference to each
   part.

   Report title:
     The Canadian audit report is titled “Auditor’s Report.” The German audit
  report is titled "Auditors' Certificate".

   Report address:
     The German audit report is addressed to the Board of Management.

   Introductory paragraph:
      The Canadian introductory paragraph indicates that an audit was performed
   and includes three items: (1) the financial statements that were audited, (2) the
   responsibility of management and (3) the responsibility of the auditor. The
   German report mentions that the auditors conducted an audit, but does not
   specifically indicates the financial statements that were audited. The report
   makes reference to the "consolidated financial statements." The report does
   not mention the responsibility of management or the auditor.

   Scope paragraph:
      The German report makes no mention of what the audit entails and how the
   auditors conducted the audit and states that the audit was conducted in
   accordance with the professional standards and German legal provisions

   Opinion paragraph:
      In Canada, the opinion paragraph states the auditor's conclusions. It
   includes the words "present fairly" to describe how the auditors believe the
   financial statements are presented. The German audit report uses "true and
   fair view."

   Name of firm:
              In the German audit report both the firm name and the individual auditors'
            names appear.

            Audit report date:
              The reports conclude with the audit report date. This date has the same
            meaning as the Canadian report; it indicates the day on which the auditor has
            completed the most important auditing procedures.

                Some of the reasons behind the differences in the German audit report
            result from different accounting laws and procedures. In Canada, the private
            sector establishes accounting and auditing standards. In Germany, as in many
            other countries, accounting and auditing standards are part of the country's
            laws and regulations. Germany has a well-established public accounting
            profession with strict rules on independence and professional ethics. The
            profession is a self-governing body (Wirtschaftsprüferkammer). The Institute
            of Public Accounting (IdW) sets German auditing standards that are
            comparable with those of other developed countries. A fundamental principle
            is that the German auditor exercises due professional competence and is
            guided by his or her own independent judgment. The German auditor may
            depart from the standard wording in the set-forth audit report only if he or she
            either wants to call attention to a particular aspect of the statements or wants
            to qualify or disclaim an opinion. German law requires the auditor to conduct
            a full-scope audit by accumulating extensive and detailed information on the
            environment of the firm.

Chapter 3
1. In Problem 1-44 a number of Internet sites were identified that contained information
   on the mail order industry. Sites included were the National Mail Order Association
   (www.nmoa.com), Pegasus Research International, LLC (www.pegasusri.com),the
   National Retail Federation (www.nrf.com), the International Society for Strategic
   Marketing (www.issm.org). Additionally, a number of the major public accounting
   firms have sites that contain information on the retail industry.

       a.     EarthWear would likely be assessed to have low to moderate client business
              risk. The following factors would be considered in assessing client business
              risk:
             The industry is highly fragmented and subject to stiff competition.
             Profitability within the industry is highly variable and affected by overall
                consumer spending.
             For many entities, including EarthWear, sales are seasonal (most sales occur
                during the Christmas season).
             The company is well positioned within the retail clothing industry.
             EarthWear ranks in the top third of the industry in terms of market share and
                profitability.
        b. The risk of material misstatement due to error or fraud for EarthWear would
            likely be assessed as low. Few of the risk factors listed Tables 3-2 to 3-6
            would be considered significant for EarthWear.

2.
     a. There are a number of sites on the Internet that contain information on the paging
         (telecommunications) industry. Unfortunately, many of these sites sell their data
         at relatively high prices. Three sites that contained such information are Gartner
         Group (www.info-edge.com), Cahners In-Stat Group (www.research.instat.com),
         and The Strategis Group (www.strategisgroup.com). For example, The Strategis
         Group offers a report entitled "The State of the US Paging Industry: 1998" for
         $1,700. There are other sites that contain limited information on the paging
         industry. The Personal Communications Industry Association (PCIA)
         (www.pcia.com) and the Canadian Wireless Telecommunications Association
         (CWTA) (www.cwta.ca) have websites that contain information on the industry.
         Another source of information is the homepages of other companies that operate
         in the paging industry. Some examples include competitors of Calabro Paging
         Services: American Paging, Inc., Metrocall, Inc., Page America Group, Inc., and
         Paging Network, Inc. For example, an examination of Metrocall, Inc.'s annual
         10-K provides significant information on the risks faced by companies in the
         paging industry.
     b. The memo describing Calabro Paging Services' client business risk should include
         the following factors:
              Highly competitive industry, with price being the primary means of
                 differentiation among service providers.
              There are 500 licensed companies with the industry undergoing
                 consolidation through merger and acquisition.
              The industry requires substantial funds to finance the maintenance and
                 growth of operations and customer base.
              Many smaller companies in the industry are losing money.
              There are significant risks to changing technology.
              Many of Calabro's competitors are larger and better financed.
              The industry is subject to federal and state regulation.

Chapter 4
1.    A general search for each term using an Internet browser resulted in a long list of
      "hits;" most of which did not apply to the material covered in the text. One site
      (www.accountingstudents.com) provided a glossary of auditing terms that
      contained EDI and image processing systems. The Institute of Internal Auditors'
      home page (www.theiia.org) contained some information related to EDI and
      image processing systems. This information was available at a related IIA site
      (www.itaudit.org). Using the search function at both the CICA’s and AICPA's
      home pages (www.cica.ca and www.aicpa.org), identified a significant number of
      references to the three terms.
Chapter 5
1. A search of the Internet identified a number of potential sources for information on
the mail order industry:
            The National Mail Order Association (www.nmoa.com) is one site where
              small to medium-sized organizations can go to get information on
              education, ideas, resources, and contacts.
            Pegasus Research International, LLC (www.pegasusri.com) maintains a
              home page that contains statistics on E-commerce and the state of the
              Internet.
            The National Retail Federation (www.nrf.com) maintains historical retail
              statistics.
            The International Society for Strategic Marketing (www.issm.org)
              maintains a site that contains economics statistics from the Census Bureau
              on various SIC codes related to the mail order industry.
            Lastly, a number of the major public accounting firms have industry
              specialization in retail. The sites of these firms contain information on the
              retail industry.

2.      The memo should include information gathered from the EarthWear and Willis
        and Adams home pages about the client’s business and industry. The information
        gathered in Internet assignment 1-46 or 5-45 should provide additional
        information on the mail order industry. Chapter 3 discusses materiality for
        EarthWear and the various risk factors that would affect the auditor’s risk
        assessments. EarthWear has a strong control environment and strong internal
        controls over its various business processes (for example, revenue and purchases
        cycles). There is a relatively low possibility for errors, fraud, or illegal acts.
        Comparison of EarthWear’s ratios to industry data (Exhibit 5-4) indicates that
        EarthWear’s financial position, profitability, and solvency are excellent.

3.     The Institute of Internal Auditors (IIA) home page (www.theiia.org) contains
        detailed information about various activities of the IIA. This includes information
        on the profession, certification, conferences, products, etc. A search of the Web
        site identified information about independence and objectivity under the “About
        the profession” button.

Chapter 6
1.   The information to complete the control environment questionnaire was obtained
      from the text, and the home pages of EarthWear and Willis and Adams.


Control Environment Questionnaire
Client: EarthWear Clothiers                                   Balance Sheet Date: 12/31/2002
Completed by: _____ Date: ______                              Reviewed by: _____ Date: _______
BOARD OF DIRECTORS AND AUDIT COMMITTEE

An entity’s control consciousness is influenced significantly by the entity’s board of directors or audit
committee. Attributes include the board or audit committee’s independence from management, the
experience and stature of its members, the extent of its involvement and scrutiny of activities, the
appropriateness of its actions, the degree to which difficult questions are raised and pursued with
management, and its interaction with internal and external auditors.
                                                  Yes,
                                                  No, N/A      Comments
Are there regular meetings of the board of        Yes          The board of directors meets quarterly to
directors (or comparable bodies) to set                        review the company’s performance.
policies and objectives, review the entity’s                   Minutes of these meetings are prepared
performance, and take appropriate action, and                  promptly and signed by the secretary after
are minutes of such meetings prepared and                      approval of the board.
signed on a timely basis?
Does an audit committee exist?                    Yes
Does the audit committee adequately assist        Yes          The audit committee meets with the
the board in maintaining a direct line of                      external and internal auditors on a
communication with the entity’s external and                   quarterly basis.
internal auditors?
Does the audit committee have adequate            Yes
resources and authority to discharge its
responsibilities?

Is this evidenced by                            Yes          The audit committee also meets quarterly,
 Regular meetings?                                          just prior to the quarterly board of directors
 The appointment of qualified members?                      meeting. Minutes are maintained of each
 Minutes of meetings?                                       meeting. The audit committee consists only
                                                             of individuals who are not part of
                                                             management.


MANAGEMENT PHILOSOPHY AND OPERATING STYLE
Management’s philosophy and operating style significantly influence the control environment —
particularly when management is dominated by one or a few individuals. Management’s philosophy and
operating style should create a positive atmosphere that reduces the risk of misstatement and that is
conducive to the effective operation of internal control.
                                                  Yes,
                                                  No, N/A    Comments
Are management and operating decisions            No
dominated by one or a few individuals?
Are business risks adequately monitored?          Yes        EarthWear’s business plan and budgeting
                                                             process include an analysis of business
                                                             risks. Senior management meet monthly to
                                                             discuss events that might affect the
                                                             company.
Is management willing to adjust the financial Yes
statements for misstatements that approach a
material amount?
Does management adequately consult with its Yes
auditors on accounting issues?
Has management been responsive to prior           Yes
recommendations from its auditors?
Is a high priority given to internal control?     Yes
ORGANIZATIONAL STRUCTURE

An entity’s organizational structure provides the framework within which its activities for achieving
entitywide objectives are planned, executed, controlled, and monitored. Establishing a relevant
organizational structure includes considering key areas of authority and responsibility and appropriate
lines of reporting.
                                                 Yes,
                                                 No, N/A     Comments
Is the organization of the entity clearly        Yes
defined in terms of lines of authority and
responsibility?
Are controls for authorization of transactions Yes
established at an adequately high level?
Are such controls adequately adhered to?         Yes
Is the organizational structure appropriate for Yes
the size and complexity of the entity?
Has management established policies for          Yes
developing and modifying accounting systems
and control activities?
Are accounting and data processing               Yes         All data processing is centralized at the
centralized or decentralized?                                company’s headquarters.

ASSIGNMENT OF AUTHORITY AND RESPONSIBILITY

The methods of assigning authority and responsibility should result in clear understanding of reporting
relationships and responsibilities established within the entity.
                                                  Yes,
                                                  No, N/A      Comments
Is there a clear assignment of responsibility     Yes
and delegation of authority to deal with such
matters as organizational goals and objectives,
operating functions, and regulatory
requirements?
Are employee job responsibilities, including      Yes          The human resources department
specific duties, reporting relationships, and                  maintains detailed job descriptions.
constraints, clearly established and
communicated to employees?
Has management clearly communicated the           Yes
scope of authority and responsibility to data
processing management?
Does adequate computer systems                    Yes          The IT department maintains detailed
documentation indicate the controls for                        systems documentation, including
authorizing transactions and approving                         authorizations for program changes.
systems changes?
Is there adequate documentation of data           Yes
processing controls?
HUMAN RESOURCE POLICIES AND PROCEDURES

Human resource policies and practices relate to hiring, orientation, training, evaluating, counseling,
promoting, compensating, and remedial actions. The entity’s human resource policies and practices
should positively influence the entity’s ability to employ sufficiently competent personnel to accomplish
its goals and objectives.
                                                   Yes,
                                                   No, N/A     Comments
Do client accounting personnel appear to have Yes
the background and experience for their
duties?
Do client accounting personnel understand the Yes
duties and procedures applicable to their jobs?
Is the turnover of accounting personnel            Yes         There has been no turnover in the last three
relatively low?                                                years.
Does the entity adequately train of new            Yes
accounting personnel?
Does the workload of accounting personnel          Yes
appear to permit them to control the quality of
their work?
Does previous experience with the client           Yes
indicate sufficient integrity on the part of
personnel?


Chapter 12
1. A search of the Internet showed a number of sites that contained information on the
    retail industry. Unfortunately, many of these sites are for industry organizations
    and the user must be a member to obtain information. One site, the National Retail
    Federation (www.nrf.com) contains information on its National Retail Institute
    (NRI). NRI provides knowledge about consumer needs, industry trends and
    strategies that are shaping the retail industry, and demographic information. NRI
    also publishes reports and books on financial and merchandising issues, information
    technology’s effect on retailing, and a retail salary survey. For example, one report,
    published annually, is entitled Combined Financial, Merchandising & Operating
    Results of Retail Store.

     There are also a number of regional sites that contain information on the retail
     industry. For example, the North Carolina Retail Merchants Association’s site
     (www.ncrma.org) reported that North Carolina retail stores pay over $15 billion in
     wages and salaries annually.

     A number of the major public accounting firms’ home pages contained information
     on the retail industry. Lastly, some financial services companies, such as Standard
     & Poors have sites (www.standardpoors.com) that contain links to the retail
     industry.
Chapter 13
1.        A search of the Internet showed a number of sites that contained financial
    information on the retail industry. Unfortunately, many of these sites are for
    industry organizations and the user must be a member to obtain information. One
    site, the National Retail Federation (www.nrf.com) contains information on its
    National Retail Institute (NRI). NRI provides knowledge about consumer needs,
    industry trends and strategies that are shaping the retail industry, and demographic
    information. NRI also publishes reports and books on financial and merchandising
    issues, information technology’s effect on retailing, and a retail salary survey.

         Another site is Lebhar-Friedman (www.lf.com) which a leading independent
         publisher and provider of information for the retail and foodservices
         communities. Lebhar-Friedman also owns Corporate Intelligence on Retailing
         which maintains a site (www.cior.com) that has links to over 100 retailing
         companies.

         There is also the International Mass Retail Association’s (IMRA) site
         (www.imra.org) which contains general economic trends analysis, but no direct
         information on inventory turnover and merchandise liquidations.

         A number of the major public accounting firms’ home pages contained
         information on the retail industry, as does Andersen Consulting. Finally,
         financial services companies, such as Standard & Poors have sites
         (www.standardpoors.com) that contain links to the retail industry. However,
         these services are available by subscription only.


Chapter 16
1. Intel’s home page (www.intel.com) contains the financial statements for the year
   ended December 31, 1997 (later financials will be available after this book goes to
   press). The footnotes state “Highly liquid investments with insignificant interest rate
   risk and with original maturities of three months or less are classified as cash and
   cash equivalents. Investments with maturities greater than three months and less
   than one year are classified as short-term investments. Investments with maturities
   greater than one year are classified as long-term investments.” At December 31,
   1997, Intel’s balance sheet shows “cash and cash equivalents” of $4.102 billion,
   short-term investments of $5.63 billion, and long-term investments of $1.839 billion.
   The footnotes state that Intel accounts for investments in accordance with SFAS No.
   115, “Accounting for Certain Investments in Debt and Equity Securities.”

   Microsoft’s home page (www.microsoft.com) contains the financial statements for
   the fiscal year ended June 30, 1998. The footnotes state “The Company considers all
   liquid interest-earning with a maturities of three months or less at the date of purchase
   to be cash equivalents. Short-term investments generally mature between three
   months and five years from the purchase date. All cash and short-term investments
   are classified as available for sale and are recorded at market. Cost approximates
     market for all classifications of cash and short-term investments; realized and
     unrealized gains and losses were not material.” At June 30, 1998 cash and short-term
     investments amounted to $8.966 billion. “Publicly tradeable equity securities are
     recorded at market; unrealized gains and losses are reflected in stockholders’ equity.”
     At June 30, 1998 equity investments amount to $2.346 billion.

Chapter 17
1. a.     It is possible to get information on these frauds by searching the Internet using
    one of the search engines. The company name can be used to identify some
    references to such information. Using terms like “accounting fraud” and
    “accounting irregularities” also identified some information. One site that was
    particularly informative was the Wall Street Journal site (www.wjs.com). It allows
    for searches through Dow Jones Interactive and identifies articles about the topic in
    the Wall Street Journal, Forbes, Fortune, The Washington Post, and The New York
    Times. However, the user must pay for each article retrieved. Another way to get
    information on a specific company is to use the SEC’s EDGAR data base
    (www.sec.gov). By inputting the company name in the EDGAR search engine,
    filings with the SEC can be retrieved.

      b. One way to identify additional companies that recently reported an accounting
      irregularity or fraud was to again use the EDGAR data base search engine.
      Inputting the term “accounting fraud” provides a list of recently filings with the
      SEC that report fraud.

2.    Again, the EDGAR data base search engine is perhaps the best source for finding
      situations where the auditor has withdrawn an audit report on a company. The Dow
      Jones Interactive site also produced some hits.

Chapter 21
1.      a. The management of the American Institute of Certified Public Accountants
asserts the following:
 We have disclosed our business practices for electronic commerce transactions and
    executed transactions in accordance with these disclosed business practices.
 We have maintained effective controls to provide reasonable assurance that
    customers’ orders placed using electronic commerce were completed and billed as
    agreed.
 We have maintained effective controls to provide reasonable assurance that private
    customer information obtained as a result of electronic commerce was protected from
    uses not related to our business.
            The time period covered is for 3 months (e.g., December 16, 2000 through
            March 15, 2001).

        b. The CPA firm that issues the report on the AICPA’s web site is J. H. Cohn.

2.      a. Currently, Timberland does not sell products over the Internet. Both L. L.
           Bean and Land’s End use TRUSTe. TRUSTe is an independent, non-profit
            organization whose aim is to encourage companies to adopt responsible
            privacy practices, and to disclose these practices in honest, understandable
            terms.

        b. The TRUSTe seal is different WebTrust. When a user clicks on the
             TRUSTe seal they are referred to a validation page that confirms that the
             entity (Land’s End or L. L. Bean) is a licensee of the TRUSTe privacy
             program. By agreeing to display the TRUSTe seal, the Web site has agreed
             to notify the use of the following:
    What information this site gathers/tracks about you.
    What this site does with the information it gathers/tracks.
    With whom this site shares the information it gathers/tracks.
    The site’s opt-out policy.
    The site’s policy on correcting and updating personally identifiable information.
    The site’s policy on deleting or deactivating your name from their database.
             The TRUSTe seal does not, however, provide any assurances similar to those
             provided by WebTrust. It should be noted that both L. L. Bean and Land’s
             End provided very detailed information on security and privacy issues.

3.      a. The Joint Commission on Accreditation of Healthcare Organizations
           (JCAHO) Web site (www.jcaho.org) is a valuable source of information on all
           types of healthcare organizations. JCAHO’s mission is to improve the quality
           of healthcare for the public by providing accreditation and related services
           that support performance improvement in healthcare organizations. One of
           the most important aspects of JACHO’s database is ready access to
           performance reports (that is, accreditation information) on all types of
           healthcare organization by state and city.

        b. Searching the Internet produced at number of sites for information in the
           Atlanta area (my area). However, the JACHO site was by far the best source
           of information by area.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:13
posted:2/3/2012
language:simple
pages:13