https://stream.uky.edu/bbstream/acc403/acc403_CableCo_mca229/

Cable Co. Video Questionnaire

1. What are the professional, ethical, and business considerations in accepting a new client? Consider how the audit firm considers the client and itself. Your answer should include a discussion of client business risk, auditor business risk and audit risk.

2. In general, how does a public accountant obtain clients? BETWEEN 7-8 FACTORS

3. Indicate why Cable Co. needs to engage a public accounting firm to perform a certified financial audit of their financial statements and identify the reasons why any organization might desire a certified financial audit? (AT LEAST 3) What disincentives relating to an audit might deter the client from seeking one? (AT LEAST 2)

4. Why is Cable Co. changing auditors and why, in general, might a company switch auditors? Alternatively, what characteristics of the auditor, client, and environment promote stability in the auditor/client relationship? What are the advantages and disadvantages of long audit tenures?

5. Suppose Mr. Stewart began pressing Ms. Bennett whether she would agree to the use of certain accounting methods in hypothetical situations? What might this suggest to Ms. Bennett and how should she respond? (SAS#50)

6. Identify specific risks associated with Cable Co. that came to light in the preliminary research and proposal stage. Are there factors that mitigate this risk?

7. What is contained in the proposal to the client (at least 5)?

8. Identify sources that audit personnel could use to gain knowledge about the clients industry? How is industry knowledge helpful to an auditor (at least 5)? Hows industry knowledge helpful?

9. Arnie, the Cable Co.s controller was cool to the audit team and particularly Steve Hollins. What about the people, their roles, and this situation contributed to the interpersonal tension? What are the implications for the auditors of poor relations with key personnel? In general, what can be done to address such a problem?

10. In Act I, we see signs of conflict between the Gayle Bennett and Steve Hollins. Describe the tension and analyze what might cause managers in a large public accounting firm to lock horns and what might have contributed to the interpersonal tension? What are other sources of conflict that might arise amongst the audit team?

11. What valuable information can be gained from the 10-K? How can this information be used in the audit (at least 3)?

12. List as many potential sources of public information about the client as possible (at least 5).

13. How does the partner obtain information useful in making budgeting decisions? What criteria were used in staffing the engagement what other criteria might have been applied (at least 4)?

14. What factors influenced the selection of specific audit strategies for different audit areas (i.e., revenues and receivables, payroll, and construction rebuilds)? How are testing strategies matched with these factors?

15. How was the Cable Co. audit fee determined? In general, list all criteria you can think of that could be relevant in pricing an audit client. Much audit research has been done on the determinants of audit fees which can be accessed through the library at the University of Kentucky (at least 5).

16. How was materiality and audit risk assessed on this engagement? What quantitative and qualitative factors other than relationship to income might be considered in assessing materiality? (at least 2) (the SECs SAB 99 may be helpful).

17. What was the evaluation of the client's computer hardware and software? What approaches were considered in evaluating the integrity of the programs and files?

18. How does the client finance acquisitions?

19. A discussion of client-specific planning issues takes place in outside cafe. Does this raise issues regarding confidentiality owed to clients by auditors? What is the basis of an auditors duty of confidentiality and why does it exist? When is the auditor allowed to divulge client information? What measures can be taken to maintain confidentiality?

20. The client resisted disclosing material related party transactions. If the client had not relented, what reporting options would the auditor have? Would the client be satisfied with any of the options? How was the client's resistance finally overcome by the auditors?