By how much would the December 31, 2021 retained earnings be misstated if no adjustments were made for the above errors? Compute for the adjusted net income for the year 2021.
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By how much would the December 31, 2021
Compute for the adjusted net income for the year 2021.
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- You were first appointed auditor of the RST Corporation in 2020. You completed the audit for 2020 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2021 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2020 audit working papers, which entailed adjustments for the following items The December 31, 2020 inventory was understated by P5,000. No entry was made for accrued utilities expense of P2,500 as of year-end. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2020. The company failed to record the provision for uncollectible accounts in the amount of P6,000. Your examination of the 2021 entries in the accounts uncovered the following: An expenditure of P10,000 for repairs of office equipment had been charged to furniture and Equipment. The company records depreciation at 10% of the December 31 balance of the Property and Equipment accounts.…You were first appointed auditor of the Pringles Corporation in 2007. You completed the audit for 2007 and prepared audited financial statements directly from the audit working papers. You have returned to make the 2008 audit and discovered that the client's bookkeeper failed to record the adjusting entries you made in 2007 audit working papers, which entailed adjustments for the following items: 1. The December 31, 2007 inventory was understated by P5,000. 2. No entry was made for accrued utilities expense of P2,500 as of year end. 3. Ordinary motor repairs of P3,200 were charged to Accumulated Depreciation during 2007. 4. The Company failed to record the provision for uncollectible accounts in the amount of P6,000. Your examination of the 2008 entries in the accounts uncovered the following: 1. An expenditure of P10,000 for repairs of office equipment had been charged to Furniture and Equipment. The Company records depreciation at 10% of the December 31 balance of the Property and…You are the audit engagement partner and you noted the following during the review of the audit files of your clients: For each situation, describe with reason(s) the form of audit report that you should issue. (i)The audit team for 1st client could not observe the inventory count that was held at the year-end since the firm’s appointment as auditors was made after the company’s year-end and no alternative procedures could be used to confirm the inventory balance. (ii)Your 2nd client is currently building a distribution centre using its own employees on its own premises. In total, the company recorded a net profit of RM 40 million. The cost of direct labour amounted to RM 4 million, based on the cost records kept. This direct labour cost was included in the distribution center's cost. However, it is discovered that the direct labour costs are not supported as the related costing record have been accidentally destroyed. The collapse of many public companies in the last few years has…
- During the course of the audit, the following additional information was obtained: a. The trading securities were acquired on December 31, 2011. The securities have a fair value of P67,000 at December 31, 2012. b. In discussion with the company officials, it was determined that the doubtful accounts expense rate based on net sales should be reduced to 2% from 3%, effective January 1, 2012. c. As a result of errors in the physical count, inventories were overstated by P12,000 at December 31, 2011 and by P17,500 at December 31, 2012. d. On January 1, 2011, the cost of equipment purchased for P30,000 was debited to repairs and maintenance. PRTC depreciates equipment of this type by the straight-line method over a five-year life with no residual value. e. On July 1, 2012, fully depreciated equipment purchased for P21,000, was sold as scrap for P2,500. The only entry PRTC made was to debit cash and credit property and equipment for the scrap proceeds. The property and equipment (net) had a…Five months after issuing an unqualified audit opinionand an unqualified opinion on internal controls for the audit of the year ended December31, 2013, for a large publicly traded client, the client and the auditor become aware of amaterial misstatement in sales revenue for the year in question, which was the resultof a material weakness in internal controls. Is this a subsequent event or a subsequentdiscovery of facts? What are the auditor’s responsibilities related to the audit opinion andthe opinion on internal controls?Ambrose is auditing the financial statements of Mays (dated December 31, 2017). The date of the auditor’s report is February 17, 2018, and the audit report release date is February 20, 2018. For which of the following matters would Ambrose have the least responsibility?a. The obsolescence of inventory held on December 31, 2017, that was identified on January 20, 2018.b. A customer’s deteriorating financial condition that was identified on February 19, 2018.c. A merger that was announced by Mays and known by Ambrose on February 12, 2018.d. A major loss due to a catastrophe that occurred and was known by Ambrose on March 1, 2018.
- As the auditor for Company A, you discover that a material sale ($500,000 sale; cost of goods of $300,000) was made to a customer this year. Because of poor internal accounting controls, the sale was never recorded. Your client makes a management decision not to bill the customer because such a long time has passed since the shipment was made. You determine, to the best of your ability, that the sale was not fraudulent. Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction. Instructions: Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction. Please make sure to use at least 100 words in your response. Once you give your response, please respond to at least two of your peers using at least 50 words in your responses. Remember to follow the netiquette guidelines found in the course…Murray & Co., CPAs completed the audit of Classic, Inc., a non-issuer, on March 1, 2018 for a January 31, 2018 fiscal year end. The audit team encountered no significant issues and found no material misstatements. Murray & Co. has audited Classic, Inc. for several years and past audits did not reveal any significant issues or material misstatements. The audit team partner determined that a standard (unmodified) report on Classic, Inc.'s financial statements was appropriate. The auditors’ report, drafted by I.M. Nu, a staff assistant, is provided below. Independent Auditor’s Report To the Board of Directors and Shareholders Classic, Inc. Report on the Audit of the Financial Statements OpinionWe have audited the financial statements of Classic Inc., which comprise the balance sheet as of January 31, 2021 and the related statements of changes in shareholders' equity and cash flows for the year then ended, and the related notes to the financial statements. In our opinion, the…Consider the following independent and material situations:(i) The client, with reasonable justification, has changed its method of accounting for all factory and office equipment. The effect of this change is not material to the current year financial reports, but is likely to have a material effect in future years. The client will not disclose this change because of the immaterial effect on the current year financial reports.(ii) The audit was staffed primarily by three new audit assistants and a relatively inexperienced audit senior. The audit manager found numerous errors during the conduct of the audit and developed very long “to-do” lists for all members of the audit team to complete before the audit was concluded. Although the manager originally doubted the staff’s understanding of the audit procedures, by the time the audit was finished, he concluded that the new auditors did understand the client and the audit process and that no material errors existed in the financial…
- Your staff auditor, Laurie, performed the audit of A/R for Salm Company. Laurie documented the following, "I chose to confirm the largest A/R of Salm Company. The confirmation was returned indicating a balance $25,000 lower than that recorded by Salm. I proposed an adjusting entry to reduce Salm's A/R by $25,000. Since I confirmed Salm's largest A/R, no other work needs to be performed." What would your feedback be re: Laurie's work? O Laurie needs to investigate the $25,000 difference and document the reason for it. No other procedures are needed. O Laurie needs to investigate the $25,000 difference and send confirmations to other customers since the balance of A/R is overstated. Laurie's work is appropriate. O Laurie needs to investigate the $25,000 difference and send confirmations to other customers since the balance of A/R is understated.Neon Company, a CPA firm, conducted an audit for the 2020 financial statements of Gold Corporation. The auditors checked the vendors' invoices for particular information. This is an example of: * Confirmation Inspection of documents Inquiry Recalculation None of the aboveSo, owner of a trading company engaged your services as auditor. There is a discrepancy between the company’s income and the sales volume. The owner suspects that the staff is committing theft. You are to determine whether or not this is true. Your investigation revealed the following: The physical taken on December 31, 2018 under your observation showed that cost was P26,500. The inventory on January 1, 2018 showed cost of P39,000. The accounts receivable as of January 1, 2018 were P13,500. During 2018, accounts receivable written off amounted to P1,000. Accounts receivable as of December 31, 2018 were P37,500. Outstanding purchase invoices amounted to P30,000 at the end of 2018. At the beginning of 2018, they were P37,500. Receipts from customers during 2018 amounted to P300,000. Disbursement to merchandise creditors amounted to P200,000. The average gross profit rate was 40% of net sales. Required: Total Sales Total Purchases Inventory Shortage