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You are the Chief Financial Officer (CFO) of a firm that is being sued for damages it caused. It is the end of your fiscal year, and you are trying to determine the appropriate treatment of this matter. Your boss, the Chief Executive Officer (CEO) acknowledges (privately) that your firm is responsible for the damages and that the judgment will be made against your firm. Your legal counsel estimates that the penalty levied by the court will be in the range of $2 million to $6 million, with a most likely amount of $4 million.
The CEO's position on the matter is that because of the wide variance in the range of possible outcomes (i.e. penalties levied) that the best thing to do is to simply wait until the case is settled (next year), and record at that time the actual damages assessed by the court.
What are some possible reasons that the CEO may hold his viewpoint? What should be your response to the CEO? Do you think it is necessary to make an accrual for an estimated amount of the assessment or settlement? If so, what amount do you think is appropriate? Explain.
Income tax liability. Fisher's tax attorney informed you that it is possible that the client will have to pay $875,000 in taxes regarding a tax dispute that started four years ago.
Suppose you were considering depositing your savings in one of three banks, all of which pay 5 percent interest; bank A compounds annually, bank B compounds semiannually, and bank C compounds daily. Which bank would you choose? Why?
What are the circumstances that could prevent the external auditors from providing an unqualified report? What steps can be taken by CSSC to address any concerns?
What is the difference between assurance services, attestation services, and auditing services? What are the economic issues that drive the increased demand for assurance services?
As an auditor for Franken's Markets you have discovered fraudulent activities. In your previous discussions with management, no one with the Franken organization identified fraudulent behavior or activity and any questions related to such matters ..
Assume that you are the PricewaterhouseCoopers audit engagement partner and have assessed Kodak as a high-risk client. Explain the modification you would make to the audit engagement procedures to minimize any potential liability of the firm.
For each of these, indicate whether you would include in written representations for (1) all audits, (2) audits of public entities (under AS 5), or (3) not included in written representations.
Auditors cannot say that the books have been done 100% correctly because they cannot possibly look over every part of them. They instead give an opinion based on a sampling of the information
Many corporations and government entities have an internal auditing function and a separate fraud investigation function either as a subunit of internal auditing or security or as a separate unit within the organization.
Explain the control principle of independent internal verification. What practices are important in applying this principle?
Lowe Inc.'s bank statement from Western Bank at August 31, 2010, gives the following information. Determine deposits in transit. (Assume the July 31 deposit in transit cleared the bank in August). b) Determine outstanding checks. (You are calculating..
You will be required to obtain/study annual reports of companies in the industry
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