The cases inSection 9each cover audit approaches for different balance sheet accounts and business processes. For this assignment,selectthree of these cases which appeals most to you andcompleteall required questions in brief answers, approximately 30 to 45 words.

Case 9.1 Wally's Billboardscovers cash

Case 9.3 Longeta Corporationcovers auditing revenue contracts

Case 9.4 Bud's Big Blue Manufacturingcovers accounts receivable confirmations

No copy and paste, plagiarism from other sites. I will not accept.

For this assignment, select three of these cases which appeals most to you and complete all required questions in brief answers, approximately 30 to 45 words. CASE 9.1 Wally's Billboard & Sign Supply REQUIRED Complete the audit program found on working paper C 2, recording all your work on the audit program and marking the provided documents (using auditing tick marks such as the ones used on the cash lead sheetworking paper C 1) to serve as your working papers. Document the results of your work on the Audit Summary sheet (working paper C 3), noting any errors, concerns, adjustments, and/or recommendations. If you make adjustments to the ending account balances, enter the adjustments on the cash lead sheet. Note, you may also download electronic versions of the working papers from www.pearsonhighered.com/beasley. After completing the audit program, answer the following questions: [1] Why is the audit of cash an important part of the audit? [2] Bill performed tests of controls for all transaction cycles with good results. Why is it important to also perform substantive audit procedures for the ending cash balance even when tests of controls over transactions that affect the cash account indicate that those controls are operating effectively? [3] According to AICPA auditing standards, what are the necessary ingredients for audit evidence to be considered \"appropriate\"? [4] For each procedure listed in the audit program (schedule C 2), indicate the primary assertion(s) targeted by the procedure. [5] For each error, concern, or adjustment you listed on the Audit Summary (schedule C 3), briefly describe at least one additional test you could perform to gain evidence as to whether or not the cash account is materially misstated. [6] The AICPA and the American Banker's Association developed a standardized bank confirmation formsee working paper C 6. What is the purpose for confirming information in item number two on the bank confirmation form? Identify the accounts and related audit assertion(s) to which the information in item number two is relevant. [7] What audit procedures might you perform if you were to decide that the risk of fraud involving the cash account was relatively high for this client? [8] Perform an online search for \"electronic bank confirmations.\" Summarize in one page or less what you learn about recent developments in the use of web-based bank confirmations. Include a brief discussion of the advantages of electronic confirmations in your write-up. INTRODUCTION Wally's Billboard & Sign Supply, Inc. was founded four years ago by Walter Johnson. The company specializes in providing locations for sign and billboard advertising and has recently begun to enter the sign design market. After working several years in the marketing department of a large corporation, Wally decided that there was a need in his area for a company specializing in signs and billboards. Drawing on his marketing experiences, he started his own company. The company is now preparing to expand its business and has enlisted the help of your firm, Taylor & Jones, LLP. Over the past two years your firm has provided auditing and assurance services to prepare the company to seek badly needed outside funding. Along with Bill Thompson, a senior auditor, you have been assigned to help with the annual audit. Your assignment is to conduct substantive testing of the company's cash balances. Bill has already conducted tests of controls for each of the company's transaction cycles and has assessed control risk as relatively low in those cycles. He has also inquired of management regarding any restrictions imposed by external parties on the use of cash. Management assured him there are no such restrictions, but you plan to corroborate this response using bank confirmations. Wally's Billboard & Sign Supply currently has three separate bank accounts. The first is a general account used mostly for business expenses and receipts. When payments are collected they are deposited, along with any cash sale receipts, in the general account. The second account is a payroll account. Funds are transferred twice a month to this account from the general account to cover payroll. The third account is an interest bearing account that the company uses to maintain extra cash for future needs. For this assignment, you will not be required to test intrabank transfers. Case 9.3 Longeta Corporation covers auditing revenue contracts. You want to be thoroughly prepared for the meeting with the audit manager. Perform the following procedures to be certain you have all necessary information about the transaction's treatment. [1] The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) recently completed a joint project to develop a common revenue standard for U.S. GAAP and IFRS to improve revenue recognition practices and to remove inconsistencies and weaknesses in revenue requirements. The updated guidance is contained in the Accounting Standards Codification as Topic 606, \"Revenue from Contracts with Customers.\" Review that guidance to summarize the core principle for recognizing revenue and briefly describe the five steps needed to achieve the core principle. Also, describe how the core principle was not achieved in this situation. [2] In your own words, explain the company's reasoning for recording $5.8 million as current revenue while recording the remaining $1.2 million as deferred revenue. Also, document where on the financial statements the deferred revenue account would be presented. [3] Assess the content of the separate letter issued by Longeta's vice president of sales to Magicon. Document your conclusion about how the content of the letter affects or does not affect revenue recognition for Longeta for the year ended September 30, 2015. [4] Given that the letter from the vice president of sales was not attached to or documented in the order letter submitted by Magicon to Longeta, document your conclusion as to the impact, if any, the vice president's letter has on the accounting treatment for the transaction since it was not part of the order letter. [5] Research PCAOB Auditing Standards on the PCAOB's website (www.pcaob.org) to summarize the guidance for auditors in regards to their assessment of the risk of material misstatement related to revenue recognition. What do those standards require of auditors in regards to their assessment of risk related to revenue recognition? [6] Auditing standards describe three conditions that are usually found to be present. What are those three conditions and what red flags, if any, might be present at Longeta? [7] The separate letter from the vice president of sales was emailed and faxed to Magicon representatives. What would be the impact if Longeta's vice president had only provided that information orally to Magicon representatives and not forwarded the information in written form? [8] As of September 30, 2015, Magicon had only submitted the order letter. Document your conclusion about the impact on the accounting for the transaction if Longeta and Magicon (a) sign the reseller agreement within 30 days or (b) do not sign the reseller agreement within 30 days. [9] Document your final conclusion about the accounting treatment of this transaction between Longeta and Magicon. Be sure to provide a basis for your conclusion. PROFESSIONAL JUDGMENT QUESTION It is recommended that you read the Professional Judgment Introduction found at the beginning of the book prior to responding to the following question. [10] One of the environmental factors affecting judgment is the \"rush to solve\" judgment trap. Briefly describe the trap and how it applies to the situation affecting the recording of the sales transaction. BACKGROUND You couldn't be more excited about being on your first financial statement audit as you launch into your new professional accounting career. Having recently graduated with a Master of Accountancy degree, you are thrilled to be employing all the skills acquired in your rigorous accounting program. The client engagement you're now working on is Longeta Corporation, which is a Californiabased developer and marketer of software used to manage data storage functions for complex computer networks. Longeta particularly markets its products to other companies who serve as intermediaries for government purchasers. These intermediaries purchase Longeta's products and then \"resell\" them to government purchasers and other organizations. The company's stock is quoted on the NASDAQ National Market System. The audit manager in charge of the engagement assigned you responsibility for auditing revenues for Longeta. You are excited to be in charge of this highly significant account and are enjoying the work you've done so far in the audit of some of the significant revenue transactions recorded during the year. The financial statements under audit are for the fiscal period ended September 30, 2015. ASSESSING EVIDENCE OBTAINED You have gathered quite a bit of information about several of the revenue transactions for the year. One of the transactions particularly caught your attention given its size. So, you're in the process of assessing the evidence obtained to determine if the revenues from this transaction are fairly stated. You obtained this information from reviewing documentation related to the transaction and from inquiries you made of the vice president of sales and the controller. You made the following notes about what you've learned and are now preparing for a meeting with the audit manager to discuss issues related to the transaction. Here's what you've noted so far: The case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of an administrative situation. During July 2015, Longeta's vice president of sales sent a proposal to Magicon Inc, to sell $7 million worth of Longeta software and services to the U.S. Air Force. Longeta approached Magicon because Magicon has a relationship with the U.S. Air Force while Longeta does not. Magicon is a necessary intermediary under the government's procurement regulations. Under terms of the proposal, Magicon would place a $7 million order for Longeta software and services by September 30, 2015, which is the last day of Longeta's fiscal year. In exchange, Magicon would receive a sizeable commission and become an exclusive reseller of Longeta products for the Air Force. Longeta normally must enter into \"reseller agreements\" with intermediaries such as Magicon in order to complete transactions. However, given the short timetable, Magicon was unable to obtain necessary corporate approvals from its legal department to sign a reseller agreement with Longeta before year end on September 30. As a substitute for the reseller agreement, Magicon's buyers agreed to place its order through an \"order letter\" that would later be followed by a purchase order and the reseller agreement. Before the order letter was submitted, Magicon's legal department requested that Longeta grant Magicon the right to cancel its obligation to pay Longeta the $7 million if Longeta and Magicon were unable to negotiate a mutually acceptable reseller agreement within 30 days. In late September, Longeta's vice president of sales emailed and faxed a letter on Longeta letterhead to Magicon legal specialists. Here is an excerpt from the letter: \"Per our discussion, the following is a clarification of the intent of the order letter dated September 30, 2015 between Longeta Corporation and Magicon Inc. The order letter meets GAAP requirement 97-4 for revenue recognition. The order letter allows Longeta to recognize revenue for our year ended September 30, 2015... The order letter gives us 30 days to reach mutually agreeable terms and conditions. In the unlikely event that we do not reach \"mutually agreeable terms and conditions,\" Magicon will have the right to terminate the order letter and all obligations. This contingency may not be expressly stated in the order letter. However, you have my assurance that in the event that we cannot reach terms we will not hold you to the commitment to pay referenced in the order letter.\" On September 30, 2015, the Magicon legal department approved the deal and Magicon's purchasers signed and transmitted an order letter from Magicon to Longeta to buy $7 million worth of software and support services. The separate letter from the vice president of sales to Magicon, however, was not attached to the order letter and it was not referenced in the order letter. The order letter was submitted to Longeta's finance department. At that point, Longeta's made an accounting entry to record $5.8 million as current revenue for the product Longeta had shipped. The remaining $1.2 million was to be separately invoiced for updates and technical support services and was therefore recorded as deferred revenue. Case 9.4 Bud's Big Blue Manufacturing covers accounts receivable confirmations REQUIRED [1] List the four factors auditors should consider when evaluating the results of confirmation procedures. Also, what are three of the characteristics of a reliable confirmation? (For this and other questions, you may wish to refer relevant auditing standards). [2] What does it mean to \"maintain control\" over the confirmation requests and responses? What could go wrong if the auditor doesn't maintain control over the confirmation process? [3] Complete the audit log provided on the next page for each of the seven remaining confirmations. Consider whether each confirmation provides sufficient, appropriate audit evidence, whether sufficient alternative procedures have been performed for non-responses, and whether additional procedures should be performed before concluding that the confirmation provides evidence supporting the client's account balance. Be as precise and concise as possible. [4] What is the difference between a positive and a negative confirmation? What are the advantages and disadvantages of each type? [5] Search the internet to identify a real-life situation where an auditor apparently did not maintain sufficient control over the confirmation process. Briefly describe the situation you found. PROFESSIONAL JUDGMENT QUESTION It is recommended that you read the Professional Judgment Introduction found at the beginning of this book prior to responding to the following question. [6] After completing the confirmations review, your senior asks you to assess the reasonableness of the allowance for bad debts. Think about the anchoring tendency discussed in the Professional Judgment Introduction. How could the anchoring tendency bias your reasonableness assessment? What are some ways that you could mitigate the possible effects of the anchoring tendency in assessing the reasonableness of the allowance? BACKGROUND Bud's Big Blue Manufacturing (BBB), based in Kansas City, manufactures standard flight instruments for small aircraft. BBB's primary market consists of small aircraft manufacturers and repair shops. 1 This type of confirmation is known as a non-blank, positive confirmation. This case was prepared by Mark S. Beasley, Ph.D. and Frank A. Buckless, Ph.D. of North Carolina State University and Steven M. Glover, Ph.D. and Douglas F. Prawitt, Ph.D. of Brigham Young University, as a basis for class discussion. Bud's Big Blue is a fictitious company. All characters and names represented are fictitious; any similarity to existing companies or persons is purely coincidental. You are a staff auditor in your second year with a public accounting firm. This week you have been assigned to work on the BBB audit, which is already nearing completion. The staff auditor who was working on the BBB audit was just reassigned to a new out-of-town client and was not able to complete her work on BBB. As you arrive at the client's headquarters, you are met by the audit senior assigned to BBB, Jenna Checketts. Jenna asks you to start by finishing the evaluation of accounts receivable balances. Confirmations were mailed to selected customers a few weeks ago. The former staff auditor completed an evaluation of all but seven of the receivables confirmations before being reassigned. The seven remaining confirmations either indicated a potential misstatement or were not received before the staff member left. Jenna also said some of the returned confirmations may require additional follow-up to determine if differences highlighted by customers represent actual misstatements or can be explained (e.g., timing differences). It's been a while since you have evaluated confirmations, so you decide to review the relevant requirements in the auditing standards. After refreshing your memory, you begin your evaluation of the last seven confirmations for BBB's accounts receivable