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power GRATED CASE APPLICATION- CLE MANUFACTURING: PART II 9-40 (OBJECTIVES 9-6, 9-7) In Part I of the case, you performed preliminary analytical pro dures for Pinnacle (pp. 257-259). The purpose of Part II is to identify factors influencin risks and the relationship of risks to audit evidence. You ask manage house. you not advertised on were first mary year and they DIT PROCESS Sean Enegrates Educacy worksheet to Decide **** Det of stances for Account Receta por. leo Performance materialty ty the planning phase of the audit, you meet with Pinnacle's management team Another planning activities. You encounter the following situations that you he relevant to the audit: Narim has an employee who reads and saves articles about issues that may affect Lots. You read an article in the file titled, "EPA Regulations Encouraging Solar ed Engines Fostponed?" After reading the article, you realize that the regulations ment is relying upon to increase sales of the Solar-Electro division might not learnide claims that although Pinnacle has proven itself within the diesel engine to effect for at least ten years. A second article is titled, "Stick to Diesel, Pinnacle!" try they lack the knowledge and people necessary to perform well in the solar Ak management for a tour of the Solar-Electro facilities. While touring the ware- vertised on Pinnacle's Web site. You ask the warehouse manager when those items use you notice a section of solar-powered engines that do not look like the ones were first manufactured. He responds by telling you."I'm not sure. I've been here a car and they were here when I first arrived." powered engine industry Chapter 97 ASSESSING THE RISK OF MATERIAL MISSTATEMENT To be hapur muha Solar Then he bond the PTA During the Pace Clearn the born Marianne Detroit, Michigan dianament of the correction work for a building emple were and to cost the controller stated that the con with the construction company responsible for the While reading the one of the perfinancial that one customer llections for nearly the con recevole balance You Investigate this receivable and the con During a meeting with the facilities director, learn that the board oder decided to restantment of debt to finance the contacto made any payments for several month manufacturing plant for the Solar Electro division. The company also plans considerabile investment in modifications to the property on which the plans 7. While standing in line at a vending machine, you see a Pinnade vice presiden A golf shirt with the words -Todd-Machinery, you are familiar with the com the shirt and he responds by saying, "Thank you. My wife and I own the com poticed some of its repairmen working in the plant care You tell the materials we hire people to manage it." 8. After inquiry of the internal audit team, you realize there is significant amore internal audit department. You conclude the tumower is only present at the level positions 9. While reviewing Pinnacle's long-term debe agreements you identify several covenants. Two requirements are to keep the current ratio above 20 and equity below LO at all times 10. The engagement partner from your CPA firm called today notifying you that the Slour, an industry specialist and senior tax manager from the firm's Ontaris will be coming on-site to Pinnacle's facilities to investigate an ongoing disputebe the Internal Revenue Service and Pinnade 11. A member of your CPA firm, who is currently on site in Detroit at the Web sion, calls you to see how everything is going while you are visiting Set Texas. During your conversation, he asks if you know anything about the recent company loan from Welburn to Solar-Electro a. Review Part I of the case and the situations in Part II and identify informatie affects your assessment of acceptable atdit risk. Note that only some of the in Part I will relate to acceptable sudit risk. Classify the information based on three factors that affect acceptable audit risk. External users reliance en financial statements Likelihood of financial difficulties Management integrity b. Assess acceptable audit risk as high, mediumor low considering the items yo loro fied in requirement a. (A risky client will be assessed as a low acceptable and Justify your response c. Identify inherent risks for the audit of Pinnacle using the information from and 11. For each inherent risk identify the account or accounts and the relevant objectives that may be affected. Account or Relevant Audit Inherent Rik Accounts Affected Objectives power GRATED CASE APPLICATION- CLE MANUFACTURING: PART II 9-40 (OBJECTIVES 9-6, 9-7) In Part I of the case, you performed preliminary analytical pro dures for Pinnacle (pp. 257-259). The purpose of Part II is to identify factors influencin risks and the relationship of risks to audit evidence. You ask manage house. you not advertised on were first mary year and they DIT PROCESS Sean Enegrates Educacy worksheet to Decide **** Det of stances for Account Receta por. leo Performance materialty ty the planning phase of the audit, you meet with Pinnacle's management team Another planning activities. You encounter the following situations that you he relevant to the audit: Narim has an employee who reads and saves articles about issues that may affect Lots. You read an article in the file titled, "EPA Regulations Encouraging Solar ed Engines Fostponed?" After reading the article, you realize that the regulations ment is relying upon to increase sales of the Solar-Electro division might not learnide claims that although Pinnacle has proven itself within the diesel engine to effect for at least ten years. A second article is titled, "Stick to Diesel, Pinnacle!" try they lack the knowledge and people necessary to perform well in the solar Ak management for a tour of the Solar-Electro facilities. While touring the ware- vertised on Pinnacle's Web site. You ask the warehouse manager when those items use you notice a section of solar-powered engines that do not look like the ones were first manufactured. He responds by telling you."I'm not sure. I've been here a car and they were here when I first arrived." powered engine industry Chapter 97 ASSESSING THE RISK OF MATERIAL MISSTATEMENT To be hapur muha Solar Then he bond the PTA During the Pace Clearn the born Marianne Detroit, Michigan dianament of the correction work for a building emple were and to cost the controller stated that the con with the construction company responsible for the While reading the one of the perfinancial that one customer llections for nearly the con recevole balance You Investigate this receivable and the con During a meeting with the facilities director, learn that the board oder decided to restantment of debt to finance the contacto made any payments for several month manufacturing plant for the Solar Electro division. The company also plans considerabile investment in modifications to the property on which the plans 7. While standing in line at a vending machine, you see a Pinnade vice presiden A golf shirt with the words -Todd-Machinery, you are familiar with the com the shirt and he responds by saying, "Thank you. My wife and I own the com poticed some of its repairmen working in the plant care You tell the materials we hire people to manage it." 8. After inquiry of the internal audit team, you realize there is significant amore internal audit department. You conclude the tumower is only present at the level positions 9. While reviewing Pinnacle's long-term debe agreements you identify several covenants. Two requirements are to keep the current ratio above 20 and equity below LO at all times 10. The engagement partner from your CPA firm called today notifying you that the Slour, an industry specialist and senior tax manager from the firm's Ontaris will be coming on-site to Pinnacle's facilities to investigate an ongoing disputebe the Internal Revenue Service and Pinnade 11. A member of your CPA firm, who is currently on site in Detroit at the Web sion, calls you to see how everything is going while you are visiting Set Texas. During your conversation, he asks if you know anything about the recent company loan from Welburn to Solar-Electro a. Review Part I of the case and the situations in Part II and identify informatie affects your assessment of acceptable atdit risk. Note that only some of the in Part I will relate to acceptable sudit risk. Classify the information based on three factors that affect acceptable audit risk. External users reliance en financial statements Likelihood of financial difficulties Management integrity b. Assess acceptable audit risk as high, mediumor low considering the items yo loro fied in requirement a. (A risky client will be assessed as a low acceptable and Justify your response c. Identify inherent risks for the audit of Pinnacle using the information from and 11. For each inherent risk identify the account or accounts and the relevant objectives that may be affected. Account or Relevant Audit Inherent Rik Accounts Affected Objectives