Smackey Dog Food, Inc. Case Study

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Most of the big companies we know and respect today started small. These companies were a result of years of market research, planning and strategic investment. Smackey Dog Food, Inc. had created a successful company because they started with good people, they made something customers actually wanted and they spent as little money as possible. In order to continue to grow your business however, you need to be able to handle the accounting and business side of the business. Smackey Dog Food, Inc. has had some troubles in this area. Keller CPA’s does not have specific experience with auditing a dog food manufacturer, but certainly has a good bit of experience with similar small business accounting and auditing issues. The first thing to address…show more content…
The negative confirmation asks the customer to respond only if they disagree with the balance determined by the client. The positive confirmation asks the debtors to confirm directly to the auditors whether the balance of the accounts receivable from the debtors is correct or not. The positive confirmation would be used to get confirmations from third parties to verify Smackey’s accounts receivables. We will also examine the sales invoices and compare them to shipping documents to make sure that what has been invoice is what it was…show more content…
The documents used, in respective order, are purchase orders, receiving report, materials requisition form, job cost sheet, sales invoices and order forms, and shipping invoices and order forms. There does not appear to be any recording of returned dog food bags, since one person is taking them as if they never came. Presumably the customers would be getting their money refunded, so the inventory and accounts receivable would not match up. Secondly, Henry and an assistant are the only ones working with most of the cycle, with no direct oversight, creating internal control issues and a high chance of material misstatement. There is also a breach of the professional rules of conduct by Keller CPA’s. One violation is under confidentiality. Pete was out of compliance to discuss the details of the audit for Smackey Dog Food Inc. with his friend Alan. Ethical conduct and principles require that auditors maintain integrity in performing all responsibilities as regards the audit with the highest sense of integrity. This strict requirement reflects the importance of independence to auditors. Not disclosing and discussing details of the audit with people not members of the audit team is part of this

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