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Auditor Legal Liability You are the auditor of Jehello Inc., a public company with a December year end. Your firm has audited Jehello for the past three years. The following issues were documented in the working paper files for the prior year audit: The company had incurred expenditures of $400,000 related to the development of a new music format for electronic media. The large majority of the costs were related to development of software, hardware, and presentation of the results to customers who participated in focus groups. Management had been optimistic that the new sound system would work well, even though focus group results had been poor. These costs had been fully capitalized. About 40% of the company's revenues were from one customer. That contract had been due for renewal on May 15, thirty days after the audit report had been issued. Documents on file indicated that the customer seemed likely to renew the contract, although quality control disputes were escalating. On May 14, Jehello was informed that the contract would not be renewed. Jehello has defaulted on its bank loans and the bank is suing you, saying that the financial statements presented last year were false and misleading. Required: A) Which defences should the auditor use? Please consider and discuss all possible defences. In order to be awarded marks, please ensure that you use case facts to discuss the appropriateness of each defence. B) Do you believe that the auditor will lose the suit? Why or why not? C) With the newspapers constantly reporting bankruptcies, corporate scandals, management fraud and lawsuits against auditors, it is very important for an auditor to minimize audit risk and legal liability. Discuss 3 steps an individual public accountant or a public accounting firm can take to minimize its exposure/risk to legal liability.
When Groucho's deli lowers the price of their sandwiches by 9% the quantity demanded of Todaro pizza falls by 12%. What is the cross price elasticity of demand for Todaro pizza with respect to the price of Groucho's sandwiches.
Below is a table with total data for a firm in a perfectly competitive industry. Quantity Total Cost 0 100 10 220 15 300 20 360 25 450 30 600 35 770 40 960 What is the marginal cost and average total cost for the firm at each level of output
industry demand curve equals Q=900-100P and the long run average cost is a constant $1.50 per unit of output. Calculate market output, price, consumer surplus, and producer surplus in a competitive market.
Suppose that the exchange rate between the Polish Zloty and the U.S. dollar is currently 4 Zls to the dollar. The one year forward rate for the Zloty is 4.5 Zls to the dollar
Ten years ago a machine cost $800,000. Now, the same machine costs $1,200,000. Calculate the average rate of inflation per year.2) An investor bought a tax-free provincial bond, at a cost of $1000 which will pay $50 interest each year for 20 years...
howard bowen is a large-scale cotton farmer. the land and machinery he owns has a current market vlaue of $4 million. bowen owes his local bank $3 million. last year bowen sold $ 5 million worth of cotton. his variable operating costs were $4.5 mi..
A purchasing agent for a trucking company is shopping for replacement tires for their trucks from two suppliers. The suppliers' prices are the same. However, Supplier A's tires have an average life of 60,000 miles with a standard deviation of 10,0..
1-Concisely explain the economic role of brokers, dealers, investment bankers and the role of the New York Stock Exchange specialist 2-If a bond dealer bought a $100,000 municipal bond at 92% of par and sold it at 96% of par, how much money did th..
If the long-run production function is q = O.4KL^0.5, what is the firm's short-run production function if K = 5 units What is the firm's output when L = 16 workers What is the firm's marginal product of labor and average product of labo
let x denote the reaction time in seconds to a certain stimulus and y denote the temperature f at which a certain
Assume the wage is $8. Complete the following table: Workers Total Product Marginal Product of Labor Price Marginal Revenue Product (MRP) 1 17 2 2 31 2 3 43 2 4 53 2 5 60 2 6 65 2 What are the two effects of a price change
cascade pharamacreuticals company developed the following regression model, using time-series data from the past 33 quaters, for for one of its nonprescription cold remedies: y=-1.04 + 0.24X1 - 0.27X2 Where Y = quarterly sales (in thousands pf cas..
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