1) You are a CPA employed as an accountant for a large manufacturing company. Each month, you assist in preparing the companys actual monthly GAAP financial statements. Your boss tells you that one way or the other, you must make the actual months GAAP income exceed the months budgeted income. The way you are told to do this is to prepare the following journal entry in an amount which causes actual income to exceed budgeted income:

Dr. Inventory

Cr. Cost of Goods Sold

If you go along with this, are you violating any AICPA rules? If yes, which AICPA rule are you violating? (3 Points)

2) You are in a job interview for an accounting position. The interviewer notices you took this Principles of Auditing course. The interviewer asks you to briefly respond to the following 3 questions:

A. What is an audit? (3 points)

B. How are fees set on an audit? (2 points)

C. There are a number of major challenges facing the audit profession describe one. (3 point