Essay

Keyetta DuNomes

Seminar 3 Saturday

22-30

22-32

a. Increased: Cash, property, plant, and equipment, common stock, dividends

Decreased: long-term debt

No Change: A/R, A/P, Retained Earnings, Revenues

b. There wouldn’t be a change in stock price on either account

c. Both would experience an increase

23-20

23-21

24-27

a. In this situation, Little only needs to send requests for letters to those attorneys who are involved with legal matters directly affecting the financial statements. The letters should be sent reasonably near to the completion of the field work, but the follow-up on non-responses and unsatisfactory responses should not be deferred until the last day of field work. She should have examined the letters when they were returned and performed follow-up work at that time. In addition, the third letter should have addressed the lawsuit if the client informed the auditor of its existence.

b. The first letter should require the auditor to send a second request to attorney for response. The second letter should require any additional follow-up due to the nature of the work performed by the attorney. With the third letter, it is necessary to have a conference with the attorney, client, and auditor to determine the nature and significance of the lawsuit.

24-32

a. Schwartz’s legal and professional responsibility in the issuance of management letters is only to create concrete recommendations based on his professional interpretation of the audit evidence accumulated and to not leave out information of important system deficiencies.

b. They are whether the client installed the system according to his instructions or whether they moved away from his instructions. In addition whether they could have foreseen the possibility of the erased master file based on their understanding of the system.