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Auditing and Other Assurance Services

In: Other Topics

Submitted By tiffa
Words 723
Pages 3
Question 1 (3 marks)
The chair of the board of Hughes Corporation proposed that the board hire as controller a PA who had been the manager on the corporation’s external financial statement audit. The chair thought that hiring this person would reduce the cost of the annual audit and consequently save the company at least half of the fee paid to the auditors. The chair proposed giving this new controller a full staff to conduct investigations of accounting and operating data as necessary.

Required
Evaluate this proposal.

Question 2 ( 3 marks)
Your neighbor invited you to lunch yesterday. Sure enough it was no “free lunch” because he wanted to discuss the annual report of the Dodge Corporation. He owns Dodge Corporation shares and just received the annual report. He says “PricewaterhouseCoopers prepared the audited financial statements and gave an unqualified opinion, so my investment must be safe.”

Required
What misconceptions does your neighbour seem to have about the auditor’s role with respect to Dodge Corporation?

Question 3 (13 marks)
You work for a large public accounting firm with many offices across the country. As part of your new job as a senior manager in the national office, you have been assigned to do a quality control review of the Pop Shop Company audit file, for the audit conducted by one of your offices in north west Manitoba.

Your firm has been auditing the Pop Shop Company for the last four years, ever since Pop Shop went public. There may be a problem with the financial statements, as the bank did not recently renew the bank loan, and Pop Shop is scrambling to meet payroll costs. It is also having trouble getting additional financing. There is some concern that the company may have tried to prepare its financial statements in a more favourable light. It is now April 2013 and your firm is planning to issue an

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