... : 27666340 E-mail : emmie.siu@polyu.edu.hk Consultation : Monday 2:30 pm to 6:30 pm Role and Purpose This subject aims to introduce an analytical framework for carrying out business analysis and valuation by using financial statements for valuing different kind of businesses. It contributes to the achievement of the BBA Programme Outcomes by enabling students to identify and resolve ethical issues contained in the financial statements (Outcome 4), apply basic accounting and financial theories to analyze financial reports and to identify potential problems and risks (Outcome 7). By the end of this subject, students will become a professional user of financial statements to advance further into the field of business valuation as investment analysis. It requires students to present and communicate effectively in English for general business communication (Outcome 1). Learning Outcomes Upon completion of the subject, students will be able to: a. Develop the ability to critically assess a firm’s financial condition through analyzing financial statements; b. Apply analytical tools to make forecasts and value firms and projects using different valuation techniques; in certain business context such as credit analysis and equity valuation. c. Evaluate and compare corporate valuation decision in specific contexts such as securities analysis, credit assessment...
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...Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? a. Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables. b. Claim received from customers for goods returned may be intentionally recorded in other customer’s accounts. c. Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash. d. The failure to prepare shipping documents may cause an overstatement of inventory balances. 4. Accepting an engagement to examine an entity’s financial projection most likely would be appropriate if the projection were to be distributed to a. All employees who work for the entity. b. Potential stockholders who request a prospectus or a registration statement. c. A bank with which the entity is negotiating for a loan. d. All stockholders of record as of the report date. 5. In assessing control risk for purchases, an auditor...
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...of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? a. Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables. b. Claim received from customers for goods returned may be intentionally recorded in other customer’s accounts. c. Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash. d. The failure to prepare shipping documents may cause an overstatement of inventory balances. 4. Accepting an engagement to examine an entity’s financial projection most likely would be appropriate if the projection were to be distributed to a. All employees who work for the entity. b. Potential stockholders who request a prospectus or a registration statement. c. A bank with which the entity is negotiating for a loan. d. All stockholders of record as of the report date. 5. In assessing control risk for...
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...Certified Public Accountants (Institut Akauntan Awam Bertauliah Malaysia) (3246-U) January 15, 2008 Circular No: Stu/02/01/08 To: ALL REGISTERED STUDENTS MICPA EXAMINATION ACCOUNTING AND AUDITING STANDARDS The Institute’s Examination Regulations and Syllabus state that: (a) Questions involving knowledge of accounting and auditing should be answered in accordance with the requirements of approved accounting standards, approved auditing standards/guidelines and the relevant legislation; Questions involving knowledge of new approved accounting standards, approved auditing standards/guidelines and exposure drafts will not be set until at least 6 months have elapsed since the last day of the month in which the statement became effective or was published. (b) The list of accounting standards, auditing standards and other technical pronouncements, which are currently examinable in the Institute’s examination, are set out below. I. Approved Accounting Standards The Companies Act 1965 requires that approved accounting standards are to be applied to the financial statements of all companies. Approved accounting standards are issued by the Malaysian Accounting Standards Board (MASB), which is established under the Financial Reporting Act 1997. For the purposes of the MICPA pronouncements are examinable : examination, the following accounting (i) (ii) (iii) MASB approved accounting standards and other pronouncements issued by MASB; Malaysian Accounting Standards (MAS) issued...
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...An audit opinion on cash basis financial statements is an example of an opinion on financial statements that follow a special purpose financial reporting framework. True The balance sheet for an individual may be titled a "Statement of Financial Condition". True The auditors should take exception to assets presented at their estimated current values in personal financial statements. False Personal financial statements may be compiled or reviewed but they should not be audited. False A compilation of financial statements provides limited assurance regarding the fin. statements. False Compiled financial statements may omit note disclosures. True The auditors must issue a compilation report if they prepare a client's financial statements and submit them to a client who intends to use them for external purposes. True The auditors should not accept an engagement to issue a compilation report on financial information presented in a prescribed form. False Letters to underwriters should not contain negative assurances. False When a US-based organization prepares financial statements which are for use in another country, a U.S. report, modified to reflect the accounting principles of the other country, may be issued. True Assurance services improve the quality of information or its context for decision makers. True Attestation services are similar, but go beyond assurance services in scope of procedures and reporting. False Independence is required for the performance...
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...CGA-CANADA AUDITING 2 EXAMINATION March 2005 Marks 30 Time: 4 Hours Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 11/2 marks each a. An attitude of “professional scepticism” is necessary if a CGA is to perform an audit engagement with due care. Which of the following best describes how a CGA may display an attitude of “professional scepticism” when performing an audit engagement? 1) 2) 3) 4) By assuming that management is dishonest in the absence of evidence to the contrary By not allowing clients’ staff to assist in the performance of an audit By rejecting all management assertions in the absence of supporting evidence By questioning all material assertions made by management b. Which of the following steps or modifications to an audit program is likely to be the most appropriate if an auditor assesses the risk of management fraud to be relatively high? 1) 2) 3) 4) c. Performing relatively less audit work at interim dates Placing greater reliance on management’s representations Performing less extensive tests of internal controls Assigning less experienced...
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...Which of the following statements best describes assurance services? a. Independent professional services that are intended to enhance the credibility of information to meet the needs of an intended user. b. Services designed to express an opinion on the fairness of historical financial statements based on the results of an audit. c. The preparation of financial statements or the collection, classification, and summarization of other financial information. d. Services designed for the improvement of operations, resulting in better outcomes. Assurance engagements performed by professional accountants are intended to enhance the credibility of information about a subject matter by evaluating whether the subject matter conforms in all material respects with suitable criteria, thereby improving the likelihood that the information will meet the needs of an intended user. The level of assurance provided by the professional accountant’s conclusion conveys the degree of confidence that the intended user may place in the credibility of the subject matter. 2. Which of the following is not an assurance service? a. Examination of prospective information b. Audit of historical financial statements c. Review of financial statements d. Compilation of financial information Services performed by professional accountants that are not assurance engagements include the following: 1. Agreed-upon procedures 2. Compilation of financial or other information 3. Preparation of tax returns...
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...a major federal financial assistance program in a compliance audit should issue either a qualified or adverse opinion, including the basis for the opinion. The auditor would express a disclaimer of opinion only in the event of scope limitations, which is not the case here. When the audit includes basic compliance requirements which are not applicable to a major federal program, the auditor expresses a positive opinion on the compliance with respect to the items actually tested and negative assurance on those aspects of compliance which were not tested. The auditor never expresses no assurance or reasonable assurance. It is the objective of the audit procedures performed to provide the auditor with reasonable assurance that any material noncompliance with requirements will be detected. In addition to having competence, technical knowledge, skills, and experience to perform the audit professionally, auditors must complete at least 24 hours of CPE relating to governmental auditing every two years. Individuals who work on GAGAS audits for 20% or more of their time must complete at least 80 hours of CPE relating to governmental auditing every two years. The engagement letter should contain information such as: * the objective of the audit (an expression of an opinion on the financial statements); * the fact that management is responsible for: * the financial statements, * establishing and maintaining effective internal control over financial reporting, ...
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...AUDIT PRACTICE & ASSURANCE SERVICES PROFESSIONAL 2 EXAMINATION - APRIL 2010 NOTES: SECTION A: Answer Question 1, and SECTION B: Answer any two from Questions 2, 3 and 4. (If you provide answers to more questions than required in Section B, you must draw a clearly distinguishable line through the answer not to be marked. Otherwise, only the first two questions to hand will be marked.) Time Allowed 3.5 hours, plus 20 minutes to read the paper. Examination Format This is an open book examination. Hard copy material may be consulted during this examination subject to the limitations advised on the Institute’s website. Reading Format During the reading time you may write notes on the examination paper but you may not commence writing in your answer booklet. Marks Marks for each question are shown. A mark of 50 or more is required to achieve a pass in this paper. Answers Start your answer to each question on a new page. You are reminded that candidates are expected to pay particular attention to their communication skills. Care must be taken regarding the format and literacy of the solutions. The marking system will take into account the content of the candidates’ answers and the extent to which the answers are supported with relevant legislation, case law or examples where appropriate. Answer Booklets List on the cover of each answer booklet, in the space provided the number of each question attempted. Additional instructions are shown on the front...
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...plan for controlling the business 2. Market Analysis 1. The characteristics of your target market (demographic, geographic, etc.) 2. The products or services you will offer to satisfy those needs 3. The Company 1. The needs your company will satisfy 2. The products or services you will offer to satisfy those needs 4. Marketing and Sales Activities 1. Marketing strategy 2. Sales strategy 3. Keys to success in your competitive environment 5. Product or Service Research and Development 1. Major milestones 2. Ongoing efforts 6. Organization and Personnel 1. Key managers and owners 2. Key operations employees 7. Financial Data 1. Funds required and their use 2. Historical financial summary 3. Prospective financial summary (including a brief justification for prospective sales levels) [pic] Market Analysis The Market Analysis section should reflect your knowledge of your industry, and present high-lights and analysis of your market research. Detailed market research studies, however, should be presented as appendices to your plan. Industry Description and Outlook 1. Description of your primary industry 2. Size of the industry 1. Historically 2. Currently...
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...but not necessarily in all attest engagements. Furthermore, the assessment may not be at a low level. Answer (C) is incorrect. An attest engagement results in a conclusion about an assertion. Answer (D) is correct. When a CPA in the practice of public accounting performs an attest engagement, the engagement is subject to the Statements on Standards for Attestation Engagements (codified as AT 101 to AT 801). An attest engagement is one in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter, that is the responsibility of another party. [2] Gleim #: 1.1.7 -- Source: CPA, adapted A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to A. Review management’s discussion and analysis (MD&A) prepared pursuant to rules and regulations adopted by the SEC. B. Report on financial statements that the CPA generated through the use of computer software. C. Audit financial statements that the client prepared for use in another country. D. Provide the client with a financial statement format that does not include dollar amounts. Copyright 2012 Gleim Publications Inc. Printed for Evelyn McDowell Page 1 Gleim EQE Test Prep: Auditing and Systems (10 questions)...
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...AUDITING • Accounting – preparing financial statements • Auditing – examining financial statements Financial Statements Consist of: • A statement of financial position • A statement of profit or loss • A cash flow statements • Notes to the financial statements • Statement of movement in reserves Together with the documents above, companies also produce director’s reports, chairman’s statements, graphs, forecasts and public relations material and combine the whole lot into their annual report. The annual report will also include the auditors’ report. For large companies this is often a glossy booklet designed to impress shareholders and potential investors. However, the audit report covers only the financial statements, not the other documents that might be included, but the auditor need to examine some of the other documents as well. Assurance Engagements An assurance engagement is when a professional examines information for which another party is preparing. 1. Audit engagement • Means external audit • It is a form of assurance engagement 2. Assurance engagement • Includes audit engagement • Generally means a professional being engaged to examine information prepared by others • Assurance Engagements will cover many engagements other than audit such as Risk assessment reports, Review of internal controls, System reliability reports, Value for money reviews, Social and environmental reports...
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...of this act, to promote the reliability of information that is used for guidance in financial transactions or for accounting for or assessing the financial status or performance of commercial, noncommercial, and governmental enterprises. The public interest requires that persons preparing financial statements accompanied by reports or professing special competence in accountancy or offering assurance as to the reliability or fairness of presentation of such information shall have demonstrated their qualifications to do so, and that persons who have not demonstrated and maintained those qualifications, including license holders not in public practice, shall not be permitted to hold themselves out as having that special competence or to offer that assurance; that the professional conduct of persons licensed as having special competence in accountancy be regulated in all aspects of the practice of public accountancy; that a public authority competent to prescribe and assess the qualifications and to regulate the professional conduct of practitioners of public accountancy be established; and the use of titles relating to the practice of public accountancy that are likely to mislead the public as to the status or competence of the persons using those titles be prohibited. L.1997,c.259,s.2. 45:2B-44 Definitions relative to the practice of accounting. 3. As used in this act: "Attest" means providing any of the following financial statement services: any audit or other engagement to...
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...4/17/2012 ] Re: CPA Report First, I want to take this opportunity to thank you in advance for your time and consideration. I am honored to provide you with the best recommendation(s) to ensure you are aware of the correct information as it pertains to examining a subsidiary for a corporation. I am aware of your concerns and want to educate you on the options that are available. I will address: * The methodology used to determine deferred taxes. * Discuss the procedures for reporting accounting changes and error corrections. * Provide a rationale for establishing a subsidiary as a corporation. * Discuss my primary responsibilities of a CPA. * Provide the difference between a review and an audit. The methodology used to determine deferred taxes. Companies will have two different types of deferred tax methods to choose: 1. Liability Tax Allocation Method 2. Deferred Tax Allocation Method Liability Tax Allocation Method suggests that deferred taxes are based on estimated tax rates because; temporary difference will reserve itself. Meaning, all tax rates are adjusted according to corresponding rate change(s), for future use within a current period. In addition, Liability Tax Allocation Method is allowed for financial reporting purposes and should be reflected on the balance sheet (Keiso, Weygandt, & Warfield, 2007). On the other hand, Deferred Tax Allocation Method is when deferred taxes are not adjusted by corresponding rate changes...
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...CHAPTER 6 Audit Planning, Understanding the Client, Assessing Risks, and Responding Review Questions 6–1 In their investigation of a prospective client, the CPAs should assess the backgrounds and reputations of the prospect and its major shareholders, directors, and officers. Thus, inquiries are made of underwriters, bankers, and attorneys that conduct business with the prospective client. Also, the CPAs are required to make inquiries of the prospect’s predecessor auditors to obtain information that might enter into the acceptance decision, such as information regarding the integrity of management. The prospect’s financial reports, SEC filings, credit reports, and tax returns are used as sources of financial background information. 6–2 The audit committee of a board of directors must be composed of at least three independent directors. Independent directors are those who are outside directors (not officers or employees) who have no relationships that might impair their independence. This would include relationships such as performing consulting services for company management. In addition, the members must be financially literate; at least one member must be a financial expert. 6–3 An engagement letter is sent to the client by the auditors to make clear the nature of the engagement, any limitations on the scope of the audit, work to be performed by the client’s staff, and the basis for computing the auditors’ fee. The engagement letter...
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