From the following list, select the four main parts of the appendicular skeleton. 

Are you a registered student in the 2251 section of CSEC750

Describe two factors that you considered when assessing acceptable audit risk for this audit. Be sure to link to the case facts provided (generic responses that are not specific to this case will not be awarded any marks). (4 marks) [Only the first two will be marked]

List two procedures the auditor should perform before deciding to accept FatBlaster Inc. as a client. (2 marks) [Only the first two will be marked]

Comment on the most appropriate base you would use to calculate materiality, and use it to calculate overall materiality for the current year’s audit. Be sure to explain why you chose the base you did, and justify ALL parts of your calculation. Be sure to show your detailed calculation and make an overall conclusion, including any qualitative factors you considered. (8 marks) Recall that the most common bases used are as follows: 3 – 7% of pre-tax profit (net income before taxes) 1 – 3% of total assets 3 – 5% of shareholders’ equity 1 – 3% of revenues or expenses I’ve included another copy of the client’s trial balance for you (below). 

If the auditor decided that inherent risk should be assessed as ‘high’ rather than ‘low’, this would _______________ the sample size.

During your meeting with Glory, you ask her if she has any concerns about the way the business is operating. She tells you she has noticed that very few customers pay using cash and she is frustrated that her bank fees are quite high for debit and credit card transactions, so she is thinking of offering customers a discount if they pay with cash.   Provide some advice to Glory about whether her idea of offering discounts for paying in cash is a good business decision. Describe one benefit and one risk, and provide an overall conclusion. Be sure to link to the case facts provided (generic responses that are not specific to this case will not be awarded any marks). (4 marks)   Note: Only the first benefit/risk you identify will be marked.

Describe one significant internal control weaknesses related to a lack of segregation of duties. Then describe how an error could occur as a result of the weakness. Lastly, provide management with a recommendation for improvement. Be sure to link to the case facts provided (generic responses that are not specific to this case will not be awarded any marks). (6 marks)   Note: only the first one will be marked.

You have been assigned to the audit of Sports Fanatics Inc., an audit client of your firm, W & P Chartered Professional Accountants. You are responsible for evaluating the internal controls in place over the acquisition and payment cycle in this year’s audit. The following is a description of the system based on your discussions with the client staff.   Sports Fanatics Inc. is a wholesaler of team sports apparel and accessories; they specialize in professional team-branded products (from the National Hockey League (NHL), Major League Baseball (MLB), National Football League (NFL), etc.), but they can also customize products for minor sports teams. Sports Fanatics is located in Edmonton, Alberta, but due to their easy to navigate website and free shipping and return policies, sales are made to customers across the world. Most of the items purchased for resale are from countries other than Canada; Sports Fanatics tends to buy in bulk to take advantage of volume rebates and to avoid stock outs. The company maintains a perpetual inventory system.    Because the company’s sales volume is high, they must maintain large amounts of inventory, which is stored in a warehouse in Edmonton located next to the accounting department. The warehouse is managed by Trudy Kemp (Warehouse Manager). Trudy supervises three warehouse staff, who are responsible for both shipping and receiving inventory.   Trudy is the only person authorized to purchase products for Sports Fanatics. She places online orders directly with suppliers who offer their products for sale on their websites. When Trudy places an order, she prints the order details from the supplier’s website and files these orders by supplier name in a filing cabinet in the warehouse. Within 1-2 weeks of the order, suppliers send the products (along with packing slips) which are received by the warehouse staff.   Trudy purchases items from over 50 suppliers because they all offer unique products. If Trudy finds a new supplier she would like to use, she fills out a form with all of the supplier’s information (name, mailing address, telephone number, and contact person) and gives the form to the Accounts Payable Clerk, who will set the new supplier up in the system. Trudy does not have access to the general ledger.   When the items are received, the warehouse staff retrieve the copies of the order details from the filing cabinet in the warehouse and compare the amounts received to the amounts on the order. A receiving report is prepared that summarizes the quantity and type of inventory received. If products are damaged or missing, the warehouse staff notifies Trudy, who, in turn, notifies the supplier. They then make a note of the discrepancy on the order and the receiving report. Therefore, the receiving report shows only the goods that were received in good condition. The receiving reports are attached to the orders and given to Trudy.    Trudy compares the amounts on all the documents, initials the receiving report as approved, and gives the paperwork to the Accounts Payable Clerk.    Invoices from suppliers are received either in the mail or via e-mail (usually 2-3 weeks after the goods are received) and are opened by the Accounts Payable Clerk. When the invoices are received, the Accounts Payable Clerk agrees the details from the invoice to the receiving report and to the original order, finds the supplier in the system, and enters the amount on the invoice into the system for payment (Dr. Inventory, Cr. Accounts Payable). If there were any discrepancies noted on the receiving report by the warehouse staff, the Clerk makes sure that the supplier adjusted the invoices to reflect the quantities actually received on the receiving report. The Clerk then attaches the invoice to the receiving report and the order and processes the payments. Sports Fanatics runs cheques every Friday. The President must approve cheques over $5,000. Otherwise, they are signed electronically by the Accounts Payable Clerk.   Twice per year, Trudy and the warehouse staff do an inventory count. If there are differences, Trudy must approve them before they are processed in the system. In the past few years, the book-to-physical adjustment has been gradually increasing, from $5,600 in 2018 to $95,500 in 2024. Required: In the spaces provided below:    Identify two significant internal control weaknesses. For each control weakness, describe the weakness in detail and explain how an error could occur as a result of the weakness. Then, provide management with recommendations for improvement. Note: at least one of your weaknesses must relate to a lack of segregation of duties. Only the first two will be marked. (8 marks)   Identify one significant internal control strength. Describe the strength in detail and explain how the control would prevent/detect/correct errors. Then describe a procedure that the auditors could use to test whether the control is operating effectively. Only the first one will be marked. (4 marks) Note: Do not click anywhere outside of the tables below. If you accidentally delete a table, you can try to undo it by holding down both the ‘Ctrl’ and ‘z’ keys. If that doesn’t work, you’ll need to continue on without the table in the blank space. No time extensions or grade allowances will be given for this. You may find it useful to use this ‘full screen’ icon while inputting your responses: 

Describe one substantive audit procedure you would perform to test the $1,500,000 bank loan, and identify the management assertion covered off (identify only ONE management assertion here; multiple answers will be marked as incorrect). (3 marks)   Note: only the first one will be marked. Note: Do not click anywhere outside of the table below. If you accidentally delete a table, you can try to undo it by holding down both the ‘Ctrl’ and ‘z’ keys. If that doesn’t work, you’ll need to continue on without the table in the blank space. No time extensions or grade allowances will be given for this. You may find it useful to use this ‘full screen’ icon while inputting your responses: