Question

Peer review: Garcia and Foster, CPAs and their audit of Alpine Cupcakes, Inc.

Introduction: Accounting firms that are members of the American Institute of Certified Public Accountants (AICPA) and practice public accounting are required to be part of an approved practice-monitoring program, such as the AICPA’s Peer Review Program. Most state boards of accountancy require regular peer reviews, even if the firm is not a member of the AICPA. The AICPA states:

The goal of practice monitoring, and the program itself, is to promote quality in the accounting and auditing services provided by the CPA firms (and individuals) subject to these standards. This goal serves the public interest and enhances the significance of AICPA membership. Firms (and individuals) enrolled in the program are required to have a peer review, once every three years, of their accounting and auditing practice related to non Securities and Exchange Commission (SEC) issuers covering a one-year period. The peer review is conducted by an independent evaluator known as a peer reviewer. The AICPA oversees the program, and the review is administered by an entity approved by the AICPA to perform that role. [AICPA Standards for Performing and Reporting on Peer Reviews, 2009, §1000.02-03.]

Assignment: You are a peer reviewer conducting a review of the firm Garcia and Foster, CPAs. As part of your work, you are examining and evaluating the audit evidence and documentation for the 20X2 audit of their client Alpine Cupcakes, Inc. In this part of your assignment, you are examining the firm’s audit documentation in relation to the audit of Alpine’s Cash balance. Please complete the following tasks:

1. Based on your review of the Cash, you believe that there were some issues with the audit work performed. You decide to review in detail the auditing procedures from the audit program and the related documentation. Identify any of the following issues:
a. Did they perform all of the steps associated with the audit program?
b. Did they perform the steps accurately? If not, then specifically state the nature of the problem and follow up on it to the extent possible with the information given.
c. Do you see any other issues or problems with the auditors’ work or client documentation?

2. You are also concerned about the adequacy of the substantive audit work done by Garcia and Foster. Thus you decide to carefully and in detail review the cash confirmation and bank reconciliation substantive audit program steps. Identify any of the following issues:
a. Did they perform all of the steps associated with the audit program?
b. Did they perform the steps accurately? If not, then specifically state the nature of the problem and follow up on it to the extent possible with the information given.
c. Do you see any other issues or problems with the auditors’ work or client documentation?

3. After answering the above questions, write a professional memo to the firm’s partner (Anna Garcia) summarizing your findings for previous questions. The memo should be 1 page or less single spaced.
a. Identify the areas of the audit that need improvements.
b. Provide feedback on ways to improve their audit of the cash account.
c. Use constructive criticism with the knowledge that someday you could be applying for a job with Garcia and Foster, CPAs.

Solution Preview

This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.

The audit program wants to make sure that Miguel Lopez reviews and signs off on the monthly Control Listing by the 2nd day of the following month. But the October listing was reviewed by Miguel on November 29 and the December listing was reviewed on January 1 of the following year. The documentation did not provide information that this step has been followed and checked and if it has been checked it does not reveal in the documentation the delay in this process.

Next, the audit program states that they should check if the company employees follow the proper authorization limits where Miguel Lopez signs any checks under $5,000 and Alexis Madison co-signs (along with Miguel) any checks over $5,000. The documentation did not reveal the fact that Diana Hayes, who is not authorized for this transaction, signed the check no. 4796 for $165.00. It also did not reveal the fact that the check no 4811 for $5,675.76 was signed by Miguel Lopez and co-signed by Diana Hayes, which should not happen, as Alexis Madison is the one authorized to do it. Also, the check no. 4808 for $78,496.32 was signed by Miguel Lopez alone, when it is supposed to be co-signed by Alexis because it is higher than $5,000....

This is only a preview of the solution. Please use the purchase button to see the entire solution

Related Homework Solutions

Bond Calculations
Homework Solution
$28.00
Business
Accounting
Bond
Calculations
Company
Rate
Interest
Money
Issuance
Market
Accounting Questions
Homework Solution
$150.00
Business
Accounting
NextCard
Lipper
Holdings
DHB Industries
Fred Stern
First Securitie
Business Questions
Homework Solution
$50.00
Accounting
Business
Economy
Finance
Assets
Liabilities
Net Working Capital
Inventory Turnover
Sales
Income Statement
Accounting Questions
Homework Solution
$20.00
Finance
Business
Accounting
Costs
Economy
Balance
Shares
Insurance
Capital
Straight-Line Method
Amortization
Interest
Bond Liability
Expenses
Cash Flow
Market Conditions
Accounting Questions
Homework Solution
$77.00
Accounting
Inventory
Trial
Balance
Retained
Earnings
Count
Dividends
Interest
Income
Statement
Cash
Flow
Get help from a qualified tutor
Live Chats