Reference no: EM132245481

Short answer Questions -

In confirming that the line item of merchandise inventory includes only valid inventory accounts that reflect actual purchased and produced inventory, all of which is owned by the client, an auditor most likely gathers evidence in support of management's financial statement assertion of

a. Occurrence and rights and obligations.

b. Accuracy and valuation.

c. Completeness.

d. Presentation and disclosure

In confirming that inventory is property priced using an acceptable method and considering the application of the lower-of-cost-or market rule, an auditor most likely gathers evidence in support of management's financial statement assertion of

a. Occurrence and rights and obligations.

b. Accuracy and valuation.

c. Completeness.

d. Presentation and disclosure.

(1) What is the role of internal control and how does internal control affect the extent of audit procedure?

(2) How are acceptable audit risk and acceptable detection risk related?

(3) What is materiality and why is it important to auditors?

(4) What two conditions must be met in order to issue a qualified statement?

(5) Daze is a calendar year taxpayer. When can the IRS make a timely assertion of an income tax deficiency against Daze, if Daze filed a return on April 1 of year two, what conclusion would you reach if:

(1) The deficiency asserted rests on an alleged omission of a $10,000 fee for Daze's services which, if reported, would have increased the gross income reported on the return to $60,000?

(2) The deficiency asserted rests on an alleged omission from gross income, whatever the amount, done by Daze with the deliberate attempt to evade tax?

(6) BHCC will invest $110,000 in a project that will produce the following cash flows.

Year	Cash Flow
1	$25,000
2	(4,000)
3	90,000
4	(12,000)
5	28,000

The cost of capital is 11 percent. Should the project be undertaken? Please provide your supporting your conclusion.