Shellyhuzaynah's Blog

B.01 Worksheet Group 1

shellyhuzaynah — Sat, 20 Feb 2010 05:24:54 +0000

Leader :

Pandam Rukmi Wulandari (20207845)

Members :

Delvita Dita Putri Anggrayni (20207269)

Shelly Huzaynah (21207019)

Sri Wahyu Handayani (21207047)

Windy Atmawardani Rachman (21207174)

Object : Manufacturing Accounts Payable Department

Clien : Anthoni CPA

Item/ Description	Weaknesses	Strength	Recomendation
Otoritation	There’s no complete authorize (due date, prepared by and agreed by)	-	Completely authorize page would be necessary thing to avoid error in authorizing.
Invoice	There’s no invoice number	Prevent fictitious purchases.	Invoice number required.
Order Purchase	There’s no classification products related with it	1. Prevent waste, because the purchase of goods that should not be necessary 2. Preventing game prices can hurt the company.	Classification products needful.

A.02 Chapter 14 (14-29)

shellyhuzaynah — Wed, 03 Feb 2010 05:49:40 +0000

14 – 29

A.	SER= Number of exception / sample size

Column	Planned Audit				SER	TER(5%) – SER
Column	ARACR	Population Size	Sample Size	Number of Exeption	(%)	TER(5%) – SER
1	10	5000	200	4	2	3
2	5	5000	200	4	2	3
3	5	5000	50	1	2	3
4	5	50000	200	4	2	3
5	5	500	100	2	2	3
6	5	900	100	10	10	0
7	5	5000	100	0	0	5
8	5	500	25	0	0	5



B.
Column	Planned Audit				CUER
Column	ARACR	Population Size	Sample Size	Number of Exeption	CUER
1	10	5000	200	4	4
2	5	5000	200	4	4,6
3	5	5000	50	1	9,2
4	5	50000	200	4	4,6
5	5	500	100	2	6,2
6	5	900	100	10	16,4
7	5	5000	100	0	3
8	5	500	25	0	11,3

C.	1. Decrease in ARACR = CUER Increase
	2. Decrease in Population size = CUER Increase
	3. Decrease in sample size = CUER Increase
	4. Decrease in number of exception = CUER Increase

D.	Sample size and Number of exception have the greatest effects on the CUER, population size has the least effect on the CUER.


E.	It is necessary to compare the CUER with the TER because the auditor need to analyze the individual exception to find the weakness of internal control.



For complete document, click Chapter14 (14 – 29)

A.02 Chapter 14 (14-28)

shellyhuzaynah — Wed, 03 Feb 2010 05:33:31 +0000

14 – 28



A. By using judgement

Column	Planned Audit				Initial Sample
Column	ARACR	TER	EPER	Population Size	Initial Sample
1	10	6	2	1000	90
2	5	6	2	100000	135
3	5	5	2	6000	150
4	5	6	2	1000	100
5	10	20	8	500	55
6	10	20	2	500	45
7	5	2	0	1000000	190

B. By using attributes sampling from the appropriate part of Table 14-8

Column	Planned Audit				Initial Sample
Column	ARACR	TER	EPER	Population Size	Initial Sample
1	10	6	2	1000	88
2	5	6	2	100000	127
3	5	5	2	6000	181
4	5	6	2	1000	127
5	10	20	8	500	25
6	10	20	2	500	18
7	5	2	0	1000000	149

C.	Increase in ARACR = Sample Decrease
	Increase in TER = Sample Decrease
	Increase in EPER = Sample Increase
	Incrase in population size = Sample Increase

D.	because there are differences in ARACR and TER percentage and also there is a huge differences in population size.


E.	ARACR and TER have the greatest effect on the initial sample size and population size has the least effect on the initial sample size.


F.	It called the initial sample size, because the exceptions in the actual sample must be evaluated before it is possible to know whether the sample is sufficiently large to achieve the objectives of the test.




For complete document,,click Chapter 14 (14 – 28).

A.01 Internet Problem (Worksheet 12)

shellyhuzaynah — Wed, 03 Feb 2010 03:35:02 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

How does IT governance fit into an organization’s overall governance?

Answer :

IT governance fit into an organization’s overall governance, it because of these three reason :

IT contributes directly to market value.
IT is essential for the achievement of business goals.
IT involves large investments and business risks.

Question :

The Executive Summary makes five recommendations for management with respect to IT. What are these recommendations?

Answer :

The recommendations for management with respect to IT :

Establish an overall cross-functional compliance team and a dedicated sub team managed by a director level person. The team should be supported by C-level executives and include executive from finance, IT, legal, marketing and affected business units.
Coordinate IT activities within the scope of an overall security and disaster recovery plan.
Have Finance or Audit take final responsibility to ensure compliance with SOX. Marketing should take the lead on customer data usage decisions affecting privacy as well as the Do Not Call Registry. IT is one input to the whole process.

Question :

How would an auditor likely view a company’s IT environment if the organization had implemented the above recommendations?

Answer :

Auditors are necessary to revise the procedures used to assess and evaluate their clients’ internal control structures. SAS 941 provides auditors with much-needed guidance regarding the effect of IT on internal controls. The standard requires tests of controls in certain situations, regardless of the level of control risk2 set by the auditor. The evaluation of internal controls is not complete until the auditor obtains a sufficient understanding of the controls’ design and determines whether critical internal controls are present in the automated environment, in operation and working as intended.

Source :

A.01 Internet Problem (Worksheet 11)

shellyhuzaynah — Wed, 03 Feb 2010 03:32:58 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

What are three common pitfalls that should be avoided during brainstorming sessions? How can these problems be avoided?

Answer :

There is three common pitfalls that should be avoided during brainstorming sessions, because it can hinder an audit team’s brainstorming effectiveness :

Group domination, is one of the most corrosive problems. If the participant dominating the process can quickly squelch the creative energies of the group as a whole, which can reducing the likelihood the team will identify any actual fraud risks.
Social loafing, also called free-riding. It occurs when participants disengage from the process, expecting that other team members will pick up the slack.
Groupthink, is another pitfall to avoid. This phenomenon occurs when team members become so concerned with reaching consensus that they fail to realistically evaluate all ideas or suggestions.

These three problems can be avoided by “Groupshift”, is condition when audit team try to reach the purpose of the brainstorming session, then team leaders must exercise caution to avoid allowing the team to take an extreme position on fraud risk.

Question :

What are three important techniques to improve the effectiveness of a brainstorming session?

Answer :

There are a number of well-defined brainstorming techniques. Here are three that team leaders might find appropriate for auditors.

1. Open brainstorming, is an unstructured technique auditors can use in which discussions follow very few rules and procedures. In this type of brainstorming, individuals share ideas as they come to mind in a kind of free-for-all.
2. Round-robin brainstorming, is a structured technique characterized by a session that begins with a period of no talking during which team members engage in silent “self-brainstorming,” or “brainwriting,” to form their ideas.
Electronic brainstorming, is an increasingly popular technique that combines open brainstorming with software technology.

Source :

http://www.journalofaccountancy.com/Issues/2003/Dec/APrimerForBrainstormingFraudRisks.htm

A.01 Internet Problem (Worksheet 10)

shellyhuzaynah — Wed, 03 Feb 2010 03:30:49 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

Use EDGAR to search for Tri-Valley Corporation (TVC) and Monarch Staffing Inc. Find TVC’s 10-K and Monarch’s 10-KSB for the year ended 12-31-06.

Answer :

Tri – Valley Corporation (TVC), 10-K Report, Year ended 12/31/2006.

http://www.sec.gov/Archives/edgar/data/22551/000002255107000009/tvc123106-10k.htm

Monarch Staffing Inc. 10-KBS Report, Year ended 12/31/2006.

http://www.sec.gov/Archives/edgar/data/1177326/000114037707000054/0001140377-07-000054-index.htm

Question :

Did either company report material weaknesses in ICFR? If so, what were the weaknesses?

Answer :

Yes, Tri – Valley Corporation (TVC) and Monarch Staffing Inc. report material weaknesses in Internal Control over Financial Report (ICFR). These paragraph contained the weaknesses which concluded by management:

Tri – Valley Corporation (TVC)

Management conducted an evaluation of the effectiveness of Internal Control over Financial Reporting (ICFR) based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2006. Management identified internal control deficiencies, which, in management’s judgment, represented material weaknesses in internal control over financial reporting. The control deficiencies generally related to controls over the accounting for complex transactions to ensure such transactions are recorded as necessary to permit preparation of financial statements and disclosures in accordance with generally accepted accounting principles. Such transactions included:

Proved and unproved properties.
Loans guaranteed with restricted common stock.
Deferred income taxes.
Discontinued operations from the sale of our interest in Tri-Western Resources.
Share-based payment arrangements.

Monarch Staffing Inc.

The small business issuers other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions) :

All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Source :

A.01 Internet Problem (Worksheet 9)

shellyhuzaynah — Wed, 03 Feb 2010 03:28:20 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

Internet Problem 9-1 (Materiality and Tolerable Misstatement)

Establishing materiality for the audit of a client’s financial statement requires considerable judgment. The allocation of the auditor’s preliminary judgment about materiality to the client’s accounts requires substantial judgment as well. For this reason, decisions about materiality are made by more experienced auditors. The following problem affords you an opportunity to apply the concept of materiality to an actual set of financial statements.

Imagine that you are employed as an auditor in a CPA firm that performs the audit of Microsoft. Your firm’s materiality guidelines indicate that overall engagement materiality should be set at an amount between five and ten percent of income before taxes.
1. Apply your firm’s guidelines to Microsoft’s 2003 financial statements. What percentage of income before taxes do you believe is appropriate? Why? What do you.
2. Given Microsoft’s 2003 balance sheet, what asset line items would be allocated the highest amount of tolerable misstatement? Why?

Answer :

2. Precentage of income before taxes between 5% – 10%. It’s appropriate, and not exceed misstatement maeriality level.

The steps in applying materiality:

• Determine initial consideration of materiality.

• Allocate initial consideration of materiality to the segment.

• Estimated total errors in the segment.

• Estimate the combined error.

• Compare estimates combined with the initial consideration of materiality.

Income Statement

(In millions, except earnings per share)
Year Ended June 30	2001	2002	2003

Revenue	$ 25,296	$ 28,365	$ 32,187
Operating expenses:
Cost of revenue	3,455	5,191	5,686
Research and development	4,379	4,307	4,659
Sales and marketing	4,885	5,407	6,521
General and administrative	857	1,550	2,104
Total operating expenses	13,576	16,455	18,970
Operating income	11,720	11,910	13,217
Losses on equity investees and other	(159)	(92)	(68)
Investment income/(loss)	(36)	(305)	1,577
Income before income taxes	11,525	11,513	14,726
Provision for income taxes	3,804	3,684	4,733
Income before accounting change	7,721	7,829	9,993
Cumulative effect of accounting change (net of income taxes of $185)	(375)	-	-
Net income	$ 7,346	$ 7,829	$ 9,993

Basic earnings per share⁽¹⁾:
Before accounting change	$ 0.72	$ 0.72	$ 0.93
Cumulative effect of accounting change	(0.03)	-	-
	$ 0.69	$ 0.72	$ 0.93

Diluted earnings per share⁽¹⁾:
Before accounting change	$ 0.69	$ 0.70	$ 0.92
Cumulative effect of accounting change	(0.03)	-	-
	$ 0.66	$ 0.70	$ 0.92

Weighted average shares outstanding⁽¹⁾:
Basic	10,683	10,811	10,723
Diluted	11,148	11,106	10,882

(2) Earnings per share and weighted average shares outstanding have been restated to reflect a two-for-one stock split in February 2003.

The asset line items would be allocated the highest amount of tolerable misstatement in the balance sheet of Microsoft’s is Account Receivable, because in this balance sheet report account receivable provides the highes amount in the assets, and the company’s account receivable increase every year.

Balance Sheet

(In millions)
June 30	2002	2003

Assets
Current assets:
Cash and equivalents	$ 3,016	$ 6,438
Short-term investments	35,636	42,610
Total cash and short-term investments	38,652	49,048
Accounts receivable, net	5,129	5,196
Inventories	673	640
Deferred income taxes	2,112	2,506
Other	2,010	1,583
Total current assets	48,576	58,973
Property and equipment, net	2,268	2,223
Equity and other investments	14,191	13,692
Goodwill	1,426	3,128
Intangible assets, net	243	384
Other long-term assets	942	1,171
Total assets	$ 67,646	$ 79,571

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$ 1,208	$ 1,573
Accrued compensation	1,145	1,416
Income taxes	2,022	2,044
Short-term unearned revenue	5,920	7,225
Other	2,449	1,716
Total current liabilities	12,744	13,974
Long-term unearned revenue	1,823	1,790
Deferred income taxes	398	1,731
Other long-term liabilities	501	1,056
Commitments and contingencies
Stockholders’ equity:
Common stock and paid-in capital – shares authorized 24,000; Shares issued and outstanding 10,718 and 10,771	31,647	35,344
Retained earnings, including accumulated other comprehensive income of $ 583 and $ 1,840	20,533	25,676
Total stockholders’ equity	52,180	61,020
Total liabilities and stockholders’ equity	$ 67,646	$ 79,571

Source :

http://www.microsoft.com/msft/reports/ar03/alt/income.htm

http://www.microsoft.com/msft/reports/ar03/alt/balance.htm

A.01 Internet Problem (Worksheet 8)

shellyhuzaynah — Wed, 03 Feb 2010 03:24:05 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

The vignette at the beginning of Chapter 6 in the text contains a brief description of the ZZZZ Best fraud. One area where the auditors were particularly criticized in that audit had to do with the auditors’ lack of industry knowledge. With hindsight it appeared that the fraud should have been easily detected because ZZZZ Bests’ large restoration contracts were in excess of $7 million while the largest restoration jobs on record in the insurance restoration industry were less than $3 million.

You have been approached by On the Sunny Side, a team sports uniform designer and manufacturer for women, about performing the company’s financial statement audit. The company began operations eight years ago and has experienced strong growth in the last several years. Teri Kloth, the chief executive officer, has told you that her company expects production in 2004 to be 450,000 units. She also provided summary historical financial and operating data regarding unit sales. In 2002 and 2003, the company reported sales of 365,000 and 402,000 units, respectively.

Are On the Sunny Side’s 2002 and 2003 unit sales reasonable? Why or why not? (Hint: Visit the U.S. Census Bureau’s web site. Once you are at the site, go to the “Business” section and then to the “Manufacturing” sector-specific data section. Once you are there, locate the Current Industrial Reports. Next search the CIRs by Subject Title for Apparel. Data about women’s team sports uniforms can be found by search for “Apparel.” Use the most current annual report for your analysis.

Answer :

Based on the annual report, the unit sales of woman’s team sports uniforms of On the Sunny Side is reasonable. And the expects production in 2004 to be 450,000 units, which told by Teri Kloth, the chief executive officer is fairly present, because based on the summary historical financial and operating data regarding unit sales in 2002 and 2003, the sales is increase. So there is a chance to make the sales increase more in 2004.

Question :

Internet Problem 8-2 (Obtain Client Background Information)

Planning is one of the most demanding and important aspects of an audit. A carefully planned audit increases auditor efficiency and provides greater assurance that the audit team addresses the critical issues. Auditors frequently prepare audit planning documents that provide client and industry background information and discuss important accounting and auditing issues related to the client’s financial statements.

Your assignment is to find and document information for inclusion in the audit planning memorandum. You should obtain the necessary information by downloading a public company’s most recent annual report from its web site (your instructor will give you the company’s name). You may also use other sources of information such as recent 10-K filings to find additional information. You should address the following matters in four brief bulleted responses:

Brief company history.
Description of the company’s business (for example, related companies and competitors).
Key accounting issues identified from a review of the company’s most recent annual report. (Note: Do not concentrate solely on the company’s basic financial statements. Careful attention should be given to Management’s Discussion and Analysis as well as the Footnotes.)
Necessary experience levels (that is, years of experience and industry experience) required of the auditors to be involved in the audit.

Answer :

Brief company history.

The idea for Logitech was spawned in 1976 at Stanford University, in Palo Alto, Calif. While enrolled in a graduate program in computer science at Stanford, Daniel Borel and Pierluigi Zappacosta formed a friendship that would become a business alliance. While completing their education, Borel, a Swiss, and Zappacosta, an Italian, identified an opportunity to develop an early word-processing system. The pair spent four years securing funding and eventually built a prototype for the Swiss company Bobst.

Shortly thereafter, Borel and Zappacosta joined forces with Giacomo Marini, a former Olivetti engineer and longtime friend of Zappacosta, on a second venture. The three eventual founders of Logitech began work as consultants in publishing-related software development and hardware architecture. Ricoh awarded them a four-month contract for a feasibility study on developing a graphical editor.

With this initial funding in hand, Borel, Zappacosta and Marini founded Logitech S.A., on Oct. 2, 1981, and opened its first office in Apples, Switzerland. Originally, it was to be named Softech because of the software background of the three founders. Since this name was already registered, the founders chose Logitech, using the root of the French word for software: “logiciel.”

Zappacosta led a feasibility study from the back yard of a farm in Apples that served as Logitech’s first office. In January 1982, the Logitech team showed Ricoh management a prototype. Ricoh agreed to move forward on the project and tasked the Logitech team with most of the software development. Shortly thereafter, the trio opened Logitech’s first U.S. office, at 165 University Ave. in Palo Alto, Calif., to be close to Ricoh’s development office in nearby San Jose.

Description of the company’s business (for example, related companies and competitors).

Logitech International S.A. is a global leader in peripherals for personal computers and other digital platforms, developing and marketing innovative products in PC navigation, Internet communications, digital music, home-entertainment control, video security, interactive gaming and wireless devices. For the PC, the Company’s products include mice, trackballs, keyboards, gaming controllers, multimedia speakers, headsets, webcams and 3D control devices. For digital music devices, the Company’s products include speakers, headphones, earphones and custom in-ear monitors. For gaming consoles, the Company offers a range of controllers and other accessories. In addition, Logitech offers wireless music solutions for the home, advanced remote controls for home-entertainment systems and PC-based video security systems for a home or small business. The Company generates revenues from sales of its products to a worldwide network of retail distributors and resellers and to original equipment manufacturers (“OEMs”). The Company’s sales to its retail channels comprise the large majority of its revenues. For the fiscal year ended March 31, 2009, the Company generated net sales of $2.2 billion, operating income of $109.7 million, net income of $107.0 million, employed approximately 6,400 employees and conducted business in over 100 countries.

Logitech operates in a single industry segment encompassing the design, manufacturing and marketing of personal peripherals for personal computers and other digital platforms. Our research and product management teams are organized along product lines, and are responsible for product strategy, industrial design and development, and technological innovation. Our global marketing and sales organization helps define product opportunities and bring our products to market, and is responsible for building the Logitech brand and consumer awareness of our products. This organization is comprised of retail and OEM sales and marketing groups. Our retail sales and marketing activities are organized into three geographic regions: Americas (including North and South America), Europe-Middle East-Africa (“EMEA”), and Asia Pacific. Our OEM sales team is a worldwide organization with representatives in each of our three regions. Our OEM customers include the majority of the world’s largest PC manufacturers. A summary of our net sales and long-lived assets by geographic region can be found in Note 18 to the Consolidated Financial Statements in Item 15, which is incorporated herein by reference. A discussion of factors potentially affecting our operations is set forth in Item 1A Risk Factors, which is incorporated herein by reference.

Since 1994, we have had our own manufacturing operations in Suzhou, China, which currently handle approximately half of our total production. We outsource the remaining production to contract manufacturers and original design manufacturers located in Asia. Both our in-house and outsourced manufacturing is managed by our worldwide operations group. The worldwide operations group also supports the business units and marketing and sales organizations through management of distribution centers and of the product supply chain, and the provision of technical support, customer relations and other services.

Key accounting issues identified from a review of the company’s most recent annual report.

Over the last several years, Logitech have broadened product offerings and the markets in which they sell. Our product expansion has been primarily organic, but we have also grown as a result of a limited number of acquisitions that expanded our business into new product categories. In light of the current global economic situation, we will continue to evaluate our strategy related to our product offerings.

Necessary experience levels required of the auditors to be involved in the audit.

The experiance level required of the auditors to be involved in the audit process, they must understand the auditing technic to increase their ability. Such as, Auditing Around the Computer, Auditing Through the Computer, and Auditing with the Computer.

Source :

http://www.census.gov/econ/

http://www.census.gov/manufacturing/cir/historical_data/mq315a/index.html

http://ir.logitech.com/documents.cfm?cl=us,en

http://www.sec.gov/Archives/edgar/data/1032975/000120677409001138/0001206774-09-001138-index.htm

A.01 Internet Problem (Worksheet 7)

shellyhuzaynah — Wed, 03 Feb 2010 03:21:49 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

Read about ACL’s solution for data quality and fraud detection. How might an auditor use ACL’s data analytics software for these two purposes?

Answer :

Auditors use ACL’s data analytics software for data quality and fraud detection. ACL technology helps auditors/organizations detect and prevent fraud by allowing auditors/organizations to:

Test 100 percent of transactions
Quickly access data from any source
Flag all suspicious activity
Automate testing to free up resources for more strategic investigations
Summarize fraud risks for management review

Question :

How might ACL be used by a company to comply with the requirements related to internal control over financial reporting? Hint: Take a look at ACL’s Continuous Controls Monitoring software.

Answer :

The company used ACL with continuous monitoring method. It is method that a business process owner or management uses to ensure that internal controls related to business activities and financial reporting are working as intended. By providing perpetual assessment of key controls and insight into transactions, continuous monitoring can help organizations quickly identify issues that significantly impact the bottom line.

ACL offer continuous method, which allows organizations to:

Detect and prevent fraud, waste and errors
Identify segregation of duties issues
Gain prompt notification of control breaches
Drill down to exceptions for quick resolution

Source :

A.01 Internet Problem (Worksheet 6)

shellyhuzaynah — Wed, 03 Feb 2010 03:18:02 +0000

Shelly Huzaynah 21207019

SMAK01-7

Auditing 2

Question :

Read the statements issued by the PCAOB and SEC on May 16, 2005 and briefly describe the apparent underlying cause(s) for auditors’ failure in applying the concept of reasonable assurance. Hint: Read the portion of the PCAOB’s policy statement entitled “The Importance of Professional Judgment.”

Answer :

Some auditors failure in applying the concept of reasonable assurance in their first year. Based on Auditing Standard No. 2 is for the auditor to obtain evidence that a company’s control system reasonably assures that its financial statements do not contain material misstatements. To accomplish this, the auditor must not only exercise judgment to determine how to apply the standard to audit clients in different industries and of different sizes, but also exercise judgment to focus their work on areas that pose higher risks of misstatement, due either to errors or fraud. Reliance on standardized checklists that lead to a focus on controls in low-risk areas obviously fails to meet this objective.

Question :

2. Why do you think firms had such difficulty in applying the concept of reasonable assurance during the first year of implementation of Section 404?

Answer :

The first year’s implementation of Section 404 required a tremendous effort on the part of management and auditors, as well as the commitment of substantial corporate resources. The lessons learned so far – and to be learned as we complete our first cycle of inspections of audits under Auditing Standard No. 2 – should provide a solid basis for substantial improvement in the process, including significant cost reduction in the future.

Source :