Case Study Smackey Dog Foods

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Worksheet for You Decide Name Ira Turner Course Code _________ Grade ___/ Date__/__/__ Questions: Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: Smackey Dog Food, Inc. did not try to issue securities to the public, therefore, they did not have to report to the SEC. Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client? Solution: There are three main reasons why the auditor should properly plan engagements: 1. To enable the auditor to obtain sufficient appropriate evidence for the circumstances. - Obtaining sufficient appropriate evidence is essential if the CPA firm is to…show more content…
This strategy considers the nature of the client’s business and industry, including areas where there is greater risk of significant misstatements. The auditor also considers other factors such as the number of client locations and the past effectiveness of client controls in developing a preliminary approach to the audit. The planned strategy helps the auditor determine the resources required for the engagement, including engagement staffing. The auditor must assign the appropriate staff to the engagement to meet generally accepted auditing standards and to promote audit efficiency. The first general standard states the following: The Smackey Dog Food, Inc. has many remote locations that are not properly managed by the company. Keller CPA might need to seek the assistance of a specialist in this industry because they had never audited a client of this nature. UNDERSTAND THE CLIENT’S BUSINESS AND INDUSTRY – Understanding of the client’s business and industry and knowledge about the company’s operations are essential for the auditor to conduct an adequate audit. Per the 2nd standard of field work: “The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of…show more content…
These indicators go beyond financial statement figures, such as sales and net income, to include measures tailored to the client and its objectives. Such key performance indicators may include market share, sales per employee, unit sales growth, unique visitors to a Web site, same-store sales, sales by country, and sales per square foot for a retailer. ASSESS CLIENT BUSINESS RISK The risk that the client will fail to achieve its objectives related to (1) reliability of financial reporting, (2) effectiveness and efficiency of operations, and (3) compliance with laws and regulations PERFORM PRELIMINARY ANALYTICAL PROCEDURES a. Auditors perform preliminary analytical procedures to better understand the client’s business and to assess client business risk. One such procedure compares client ratios to industry or competitor benchmarks to provide an indication of the company’s performance. Such preliminary tests can reveal unusual changes in ratios compared to prior years, or to industry averages, and help the auditor identify areas with increased risk of misstatements that require further attention during the

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