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Provides recommendations as to explanation of findings, Sarbanes-Oxley concerns, appropriate sampling methods, and the external audit

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Provides recommendations as to explanation of findings, Sarbanes-Oxley concerns, appropriate sampling methods, and the external audit

 
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ACC 695 Milestone Two Guidelines and Rubric Overview

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ACC 695 Milestone Two Guidelines and Rubric Overview: For Milestone Two, you must review the data collected in the case study and report on whether it is sufficient to confirm or deny the assertions of management. Analyze audit evidence gathered to ensure it is sufficient and appropriate and provide alternative procedures that could be performed to satisfy the assertions. The information in this milestone will be incorporated into your audit report along with the information you compiled for Milestone One. To do so, analyze the following sections of Lakeside Company: Case Studies in Auditing:  Case 4: Assessing Control Risk  Case 5: Tests of Controls: The Revenue and Cash Receipts Cycle  Case 6: Procedures and Audit Documentation: Testing the Inventory Purchasing System  Case 7: Designing Substantive Audit Tests: Compensation Plans  Case 8: Observation of Physical Inventory Count Prompt: Review the information and data in the assigned sections of the Lakeside Company to ensure the audit evidence gathered is sufficient and appropriate, and provide alternative procedures that could be performed to satisfy the assertions. Note: Milestone Two is a draft of some of the critical elements of Part I of the final project. Specifically, the following critical elements must be addressed: A. Determine the risks associated with having the confirmation process controlled by the client. B. Determine the primary assertions associated with classes of transactions and events, account balances, and presentation and disclosure from the scenario. C. Analyze the types of evidence gathered and received from the scenario and document the sufficiency. Be sure to include examples from the scenario to support your response. D. Analyze the types of evidence gathered and received from the scenario and document the appropriateness. Be sure to include examples from the scenario to support your response. E. Recommend appropriate alternate procedures that would satisfy your assertions with the same sufficiency and appropriateness. For example, if your confirmations are not received, what alternate procedures could you use to reach the same sufficiency and appropriateness? Guidelines for Submission: Your milestone must be submitted as a 4- to 5-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least three sources cited in APA format. Instructor Feedback: This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Rubric Critical Elements Proficient (100%) Needs Improvement (70%) Not Evident (0%) Value Audit Report: Confirmation Process Determines the risks associated with having the confirmation process controlled by the client Determines the risks associated with having the confirmation process controlled by the client, but determination is cursory or contains inaccuracies Does not determine the risks associated with having the confirmation process controlled by the client 18 Audit Report: Primary Assertions Determines the primary assertions associated with classes of transactions and events, account balances, and presentations and disclosure from the scenario Determines the primary assertions associated with classes of transactions and events, account balances, and presentations and disclosure from the scenario, but determination is cursory or contains inaccuracies Does not determine the primary assertions associated with classes of transactions and events, account balances, and presentations and disclosure from the scenario 18 Audit Report: Sufficiency Analyzes the types of evidence gathered and received from the scenario and documents the sufficiency of the evidence, including examples from the scenario to support response Analyzes the types of evidence gathered and received from the scenario and documents the sufficiency of the evidence, but analysis is cursory, contains inaccuracies, or does not include examples from the scenario Does not analyze the types of evidence gathered and received from the scenario 18 Audit Report: Appropriateness Analyzes the types of evidence gathered and received from the scenario and documents the appropriateness of the evidence, including examples from the scenario to support response Analyzes the types of evidence gathered and received from the scenario and documents the appropriateness of the evidence, but analysis is cursory, contains inaccuracies, or does not include examples from the scenario Does not analyze the types of evidence gathered and received from the scenario 18 Audit Report: Alternate Procedures Recommends appropriate alternate procedures that would satisfy assertions with the same sufficiency and appropriateness Recommends alternate procedures that would satisfy assertions with the same sufficiency and appropriateness, but recommendations are cursory, contain inaccuracies, or are inappropriate Does not recommend alternate procedures that would satisfy assertions with the same sufficiency and appropriateness 18 Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas 10 Total 100%

 
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Chester, Inc. Trial Balances for years ending December 31, 2013, 2014 and 2015 Account Description Cash on Hand Checking Account

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Prepare Chester, Inc, Income Statement, Balance Sheet, Statement of Retained Earnings, & Statement of cash flow (indirect method).

Additional Information:

·        Land with the land improvements were sold at book value (no gains or losses) in 2014. Use following accounts- Land, Building and Land Improvements & Other Non-current assets)

·        New equipment purchased with Cash for $2,739,067 in 2014

·        New Storage Building purchased with cash for $135,000 in 2015

·        No investments have been sold or purchased in 2014 or 2015

There are currently 8,275,000 shares of common stock outstanding. No common stock gas been sold or repurchased in any of the after.

The proper format to use for the income statement is:

Sales

Less: Sales Returns & Allowances

Net Sales

Cost of Goods Sold

Gross Profit

Operating Expenses:

Total Operating Expenses

Income Before Other Gains & Losses

Other Gains & Losses

Total Other Gains & Losses

Income Before Income Taxes

Federal Income Tax Expense

State Income Tax Expense

Net Income

 
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Chester, Inc. Balance Sheet As on December 31, 2015 2014 2013 Assets Current assets:

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Chester, Inc.
Income Statement
For the Year Ending December 31,
 201520142013
Revenue:   
Sales288,876,206 271,839,067 307,716,148
Less: Sales Return23,110,096 12,432,247 5,621,979
Net sales         265,766,110          259,406,820          302,094,169
Less: Cost of Goods Sold          179,103,248          161,029,981          176,961,437
Gross Profit           86,662,862            98,376,839          125,132,732
Less: Expenses   
Administrative Wages Expense           19,706,506            18,344,399            21,094,132
Advertising Expense              1,058,391               1,161,276               1,121,425
Auto Expenses                 214,001                  235,763                  261,218
Bad Debt Expense           13,900,800               5,875,403               2,028,032
Bonus Expense                 459,000                  504,000                              –  
Depreciation Expense                 617,155                  581,102                  166,250
Freight              4,325,068               4,749,095               5,378,689
Insurance Expense                 951,774               1,045,085               1,067,428
Legal and Professional Expense              8,987,069            11,037,039               4,506,417
Maintenance Expense                    87,641                     96,020                     76,420
Miscellaneous Office Expense                    25,390                     27,803                     21,279
Payroll Tax Expense              1,609,342               1,767,149               1,938,736
Pension/Profit-Sharing Plan Ex              3,366,000               3,696,000               3,750,000
Phone                    53,651                     57,911                     95,467
Postal                    79,360                     87,140                  160,042
Property Tax Expense                 101,319                  110,252                  100,619
Rent or Lease Expense              2,230,615               1,370,273               3,254,357
Research and Development              3,080,313                  532,425            38,639,554
Utilities                 155,600                  170,765                  169,554
Warehouse Salaries              5,270,689               5,848,120               5,791,730
Warranty Expense              1,422,381               1,297,104               1,375,352
Total Expenses           67,702,065            58,594,124            90,996,701
Net Operating Income           18,960,797            39,782,715            34,136,031
Add: Other Income   
Income from Investments                 678,112                  573,158                  600,791
Interest Income                 142,168                  147,707                  255,379
Less: Other Expenses   
Interest Expense              2,942,147               3,373,056               1,093,750
Loss on Legal Settlement                             –                                –              23,965,000
Net Income Before Income Tax           16,838,930            37,130,524               9,933,451
Less: Income Tax Expenses   
Income Tax Expense – Federal              7,269,540            14,142,240               2,956,250
Income Tax Expense – State              1,258,000               2,503,200                  536,250
Net Income              8,311,390            20,485,084               6,440,951
Earnings Per Share $                     1.00  $                     2.48  $                 0.78
Chester, Inc.
Balance Sheet 
As on December 31, 
 201520142013
Assets   
Current assets:   
Cash on Hand                      2,511                       2,459                        2,483
Checking Account – Operating                 243,892                  252,858                   247,646
MMKT Accounts              1,205,563                  983,161                   806,288
Accounts Receivable           49,042,528            56,472,091             20,513,628
Other Receivables              1,200,000               1,400,000                               –  
Allowance for Doubtful Accounts           (2,942,552)           (2,387,691)            (1,578,525)
Inventory           65,990,780            75,351,471             23,531,507
Reserve for Inventory Obsolescence         (10,558,525)         (12,136,103)            (3,765,000)
Prepaid Insurance              2,667,722               2,830,474                1,829,143
Prepaid Rent                             –                                –                     250,000
Office Supplies                      9,182                       9,565                        9,259
Investments – Trading              6,978,923               6,850,198                6,935,712
Total current assets         113,840,024          129,628,483             48,782,141
Fixed assets:   
Land                 131,040                  131,040                   146,250
Buildings and Land Improvements                 833,775                  698,775                   779,882
Machinery, Equipment, Office Furniture              3,280,589               3,280,589                   541,522
Accum. Depreciation           (1,403,257)               (786,102)                (205,000)
Other Noncurrent Assets                             –                                –                        67,301
Total fixed assets              2,842,147               3,324,302                1,329,955
Total Assets         116,682,171          132,952,785             50,112,096
Liabilities   
Current liabilities:   
Accounts Payable           12,850,648            19,488,866                8,934,591
Wages Payable                 198,384                  264,513                      36,838
FICA Employee Withholding                      7,089                       9,452                        1,648
Medicare Withholding                      9,589                     12,785                            730
Federal Payroll Taxes Payable                    99,192                  132,256                        7,541
State Payroll Taxes Payable                    46,200                     61,630                        3,519
FICA Employer Withholding                      7,089                       9,452                        1,648
Medicare Employer Withholding                      9,589                     12,785                            730
Income Taxes Receivable/Payable              6,011,540               3,205,440                               –  
Line of Credit           47,481,737            52,231,360             12,500,000
Current Portion Long-Term Debt                 721,480                  677,640                               –  
Interest payable                 568,429                  470,311                               –  
Bonuses payable                 459,000                  504,000                               –  
Dividend payable           15,000,000            15,250,000                6,000,000
Total current liabilities           83,469,966            92,330,490             27,487,245
Long Term Liabilities:   
Long Term Notes Payable           12,040,880            12,762,360                               –  
Total Long Term Liabilities           12,040,880            12,762,360                               –  
Total Liabilities           95,510,846          105,092,850             27,487,245
Stockholder’s Equity   
Common Stock           10,131,250            10,131,250             10,131,250
Paid-in Capital              9,278,750               9,278,750                9,278,750
Retained Earnings              1,761,325               8,449,935                3,214,851
Total Stockholder’s Equity           21,171,325            27,859,935             22,624,851
Total liabilities and Stockholder’s Equity         116,682,171          132,952,785             50,112,096
 
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