Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

CPA Jerry Cheese became the new auditor for Python Insurance Company. Cheese knew a great deal about insurance accounting but had never conducted an audit

CPA Jerry Cheese became the new auditor for Python Insurance Company. Cheese knew a great deal

about insurance accounting but had never conducted an audit of an insurance company. Consequently,

Cheese hired CPA Tate Gilliam, who had six years of experience with the State Department of

Insurance Audit. Gilliam managed the audit and Cheese was the partner in charge.

a.

CPA Mackenzie Palin practices public accounting and is a director of Comedy Company. Palins firm

performs consulting and tax services for Comedy. Palin prepared unaudited financial statements on

Comedys letterhead and submitted them to First National Bank in support of a loan application.

Palins accounting firm received a fee for this service.

b.

CPA Ellery Idle audited the financial statements of Monty Corporation and gave an unmodified

report. Monty is not a public company, so the financial statements did not contain the SEC-required

reconciliation of deferred income taxes.

c.

CPA Gwyn Chapman audited the financial statement of BTV Ltd. These financial statements contain

capitalized leases that do not meet FASB criteria for capitalization. They resemble more closely the

criteria for operating leases. The effect is material, adding $4 million to assets and $3.5 million to

liabilities. However, BTV has a long experience with acquiring such property as its own assets after

the lease terms end. Chapman and BTV management believe the financial statements should reflect

the operating policy of the management instead of the technical requirements of the FASB.

Consequently, the auditors report explains the accounting and gives an unmodified opinion

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Financial Numbers Game

Authors: Charles W Mulford, Eugene E Comiskey

1st Edition

0471770736, 9780471770732

More Books

Students also viewed these Accounting questions

Question

1. Information that is currently accessible (recognition).

Answered: 1 week ago