Lakeside Essay

Discussion Questions1. The owners of lakeside as well as the comp some(prenominal)s bank whitethorn require that an in numberent CPA steady perform an annual inspect because the CPA firm could pee an license issue. The CPA firm in that lakeside wants to hire is also the listeners for lakesides main fiscal bank. The bank is a main user of the discover put stunned by Lakesides auditor and in this grounds would be that banks auditor too. The connection is too remainder for the CPA firm to pick up this client, it would be against the ethic every(prenominal)y code.2. Abernethy and Chapman do not have in-depth understanding of the consumer electronics industry that Lakeside is a sever of, therefore it would be an unethical and against the rules of conduct. Rule 201 in General Standards subtract 1 says, undertake only those professional services that the member raft reasonably expect to complete with professional competence. As decl ard if the firm does not have a member or take in in the dramatic art of dividing line the auditing firm should refrain from taking on that client. Could an auditing firm redeem by in auditing the books of an electronic participation when their oddity is car dealerships, probably but as an auditing firm that has never through the audits for a client in this field it is unknown the way business is handled and the correctly protocol in that field. There is an ethical obligation for the firm to discuss the expertise rented for them somewhat the industry the client is in.3. Profit-sharing bonuses appear like an easy and nice incentive for the employee by the employer but they dally along a lot of drawbacks and as an auditing firm open up a door for a red flag. There are real strict rules when adopting a profit-share policy that must be approved by the IRS and meet their guidelines. There is also a limit to the amount that employers nominate contribute to the plans. These guidelines are changing from year to yearand it would be something else Abernethy and Chapman would have to keep up on as well as do sure Rogers is doing the right thing. There is a lot of area for bilgewater here and as an auditing firm a section that would need to be under close watch.4. If Rogers wanted Abernethy and Chapman to assist them in starting systems it would depend on a few factors. Abernethy and Chapman would be able to economic aid develop the systems if Lakeside stays a private company. If Lakeside is a publicly traded company Abernethy and Chapman would have an independence issue if it was both the auditor and parcel to develop systems for output.5. If Andrews was assigned to visit the headquarters/warehouse some of the things a tour of the clients facilities is helpful in obtaining a make better understanding of the clients business operations because operations because it leads an luck to observe operations firsthand and to meet key personnel. By masking the facility you can view assets and interpret accounting data related to such as inventory and some of the factory equipment.6. There are a few reasons that Lakeside would not want to hire a CPA firm that has clients in the electronics industry, one of them being if Lakeside would not get as good of a report as the former(a) electronics, it is very each for stakeholders and investors to see which company is better. Second, Lakeside may tone of voice the auditor isnt necessarily on their side, even though as an auditor we need to stay neutral and that our obligation is to the stakeholder in the company. total the boloney risk factors that the CPA firm might encounter if they choosethis audit engagement. Be sure to include a discussion of all items that go out probably require special attention during the audit. For each of these fraud risk factors, indicate how the auditor should follow up on each potential problem if the engagement is accepted. Use the following formal tommyrot Risk FactorsAuditor Follow UpMaterial misst atement that existed on report historical cost on the new edifice. Approach this subject right away and speaking with the previous auditors for what they get under ones skind on this issue. Rogers Corporation to compel the latest facility for Lakeside This issue needs more nurture and legal terms on whether or not this is allowable. The audit resource that was rendered on the books for year ending in 2011 With Rogers refusing to write down the describe assess of the property can cause some confliction between any auditor and owner. Talking to Rogers and the previous auditor is the best way to get to the bottom of this issue and see who is at fault. Not as ofttimes of a fraud but Rogers growth plan could run the company into the ground Because Rogers was annoyed with the last firm because of stifle to his growth plans, as an auditing firm we need to figure out what is best for the company and receive whether his attitude towards not changing his growth plan would be an issu e. why does more capital from being a publicly traded company help the company out There is nothing in the description that would admit us as the firm an indication that having more capital will improve the position of the company. Growing and building more installs does not realise the problem. Coming to a determination on stock options will be crucial in the lead taking this client on.The threat of closing the newer building near the strip mall. This brings up the factor that if the company is close to closing a store before they are even our client, their future looks slim. If this is the case do we want to have a audit report of we view this business will fail in a few historic period Thats not good business all around Rogers incertitude about surroundingsThe fact that there were two electronic businesses that went out of business in the same town as him and he didnt know the reason, makes me a littleworried if he isnt exit to pay attention to his surrounds like this. I would approach this subject with our partners and Rogers before taking on this client. Does auditing them and also being the auditor of the bank they pay through become an independence problem? There would be an independence issue here that would need to either be resolved or conclude in not being able to have Lakeside as a client Abernethy and Chapmans inexperience in the field of electronics Abernethy and Chapman should discuss with Lakeside their inexperience and explain to them how they plan on gaining experienceProfit-Sharing BonusesProfit-Sharing bonuses bring up a huge fraud risk and Abernethy and Chapman need to make sure they deal with this issue and either get Rogers to love the plan or work out in great expatiate how it will work.King and familiarityCertified Public AccountantsRichmond, VirginiaINDEPENENT AUDITORS REPORTTo the StockholdersLakeside fraternityWe have audited the financial statements of Lakeside Company as of December 31, 2011 and also have observed th e operations and inner(a) controls of Lakeside.Managements function for the Financial StatementsManagement is responsible for the conceptualisation and fair presentation of the financial statements in compliance with U.S. generally accepted accounting principles. This includes the design, implementation, and maintenance of intrinsic control pertaining to the preparation and fair presentation of financial statements that are still from material misstatement whether due to fraud or error.Auditors ResponsibilityOur responsibility is to give an opinion on Lakesides financial statements based on our audits. We must conduct audits in accordance with auditing standards chiefly accepted. Those standards require that we plan and perform audits to reasonable obtain sufficient turn up that gives us the best assurance about whether the financial statements are desolate from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and discl osures in the financial statements. All these procedures depend on the auditors judgment. We bank that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Lakeside Company has chosen not to value their latest store with accordance to guidelines established by the FASB. We strongly believe that the value of Lakesides $186,000 investment in their sixth store should be impaired. The continuing failure of the shopping center makes the fate of the Lakeside store appear uncertain to us. The president of Lakeside, Benjamin Rogers, continued to report this asset based on historical cost, and not fair value. Because of this, we looking that a material misstatement exists and thus, we issued a qualified opinion.OpinionIn our opinion, moreover for the material misstatement with this investment, as mentioned in the preceding paragraph, the financial statements of Lakeside Company appear to be fairly stated with accordance to GAAP. Lakesides op erations and cash flows seem to be in conformity with GAAP for the year ended December 31, 2011.