An accounting firm has 780 hours of staff time and 272 hours of reviewing time available each week. The firm charges $1900 for an audit and $270 for a tax return. Each audit requires 60 hours of staff time and 16 hours of review time. Each tax return requires 10 hours of staff time and 4 hours of review time. What numbers of audits and tax returns will yield an optimal revenue? audits tax returns What is the optimal revenue?
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- The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month. Instructions: Enter your answers as a whole number. In part b, round your answer for profit rate to 1 decimal place. a. Suppose that for any accounting firm that hires either Ted or Jared, all the other costs of performing an audit (besides paying either Ted or Jared) come to $1,000 per audit. If the going rate that must be paid to hire an accountant is $7,000 per month, how much will it cost an accounting firm to produce one audit if it hires either Ted or Jared to do the work? $1,700 b. If the market price that accounting firms charge their clients for an audit is $1,800, what would the accounting profit per audit be for a firm that hired either Ted or Jared? $ 100 What is the profit rate as a percentage? 5.88 percent c. Suppose that firm A…Your senior auditor approved the planning materiality you just established. You are now preparing to establish your performance materiality for accounts payable and revenue. Your senior auditor tells you that the materiality judgement for accounts payable is 50%, and the materiality judgement for revenue is 65%. What is the performance materiality for accounts payable and revenue? Show your work. Your work should show: APPROPRIATE AMOUNT x AP MATERIALITY JUDGEMENT = AP PERFORMANCE MATERIALITY APPROPRIATE AMOUNT x REVENUE MATERIALITY JUDGEMENT = REVENUE PERFORMANCE MATERIALITYElitz and Van Aken, CPAs, offer three types of services to clients: auditing, tax, and small business accounting. Based on experience and projected growth, the following billable hours have been estimated for the year ending December 31, 2020: Service Billable Hours Audit Department: Staff 22,400 Partners 7,900 Tax Department: Staff 13,200 Partners 5,500 Small Business Accounting Department: Staff 3,000 Partners 600 The average billing rate for staff is $160 per hour, and the average billing rate for partners is $350 per hour. Prepare a professional fees earned budget for Elitz and Van Aken, CPAs, for the year ending December 31, 2020, using the following column headings and showing the estimated professional fees by type of service rendered and add additional rows in the table as needed:
- Your public accounting practice is located in a city of 15,000 people. The majority of your work, conducted by you and two assistants, consistsof compiling clients’ monthly statements and preparing income tax returns for individuals from cash data and partnership returns from books and records. You have a small number of audit clients; given the current size of your practice, you generally consider it a challenge to accept new audit clients.One of your corporate clients is a retail hardware store. Your work for this client has been limited to preparing the corporate income tax return from a trial balance submitted by the bookkeeper.On December 26, you receive from the president of the corporation a letter containing the following request:We have made arrangements with First National Bank to borrow $500,000 to finance the purchase of a complete line of appliances. The bank has asked us to furnish our auditors’ certified statement as of December 31, which is the closing date of our…The State Department of Taxation processes and audits income-tax returns for state residents. The state tax commissioner has recently begun a program of work measurement to help in estimating the costs of running the department. The independent variable used in the program is the number of returns processed. The analysis revealed that the following variable costs are incurred in auditing a typical tax return. Time spent by clerical employees, 10 hours at $12 per hourTime spent by tax professional, 20 hours at $25 per hourComputer time, $50 per auditTelephone charges, $10 per auditPostage, $2 per audit In addition, the department incurs $10,000 of fixed costs each month that are associated with the process of auditing returns.Required: Draw a graph depicting the monthly costs of auditing state tax returns. Label the horizontal axis “Tax returns audited.”You are an audit supervisor of PricewaterhouseCoopers (PwC) and are planning the audit of your client, Blister Pharmaceuticals co. which manufactures and imports sanitary and cleaning products (gloves, sanitizers, etc). Its year end was 31 July 2020 and the draft profit before tax is Rs 33.6 million. You are supervising a large audit team for the first time and will have specific responsibility for supervising and reviewing the work of the audit assistants in your team.Blister Pharmaceuticals Co purchases most of its raw materials from suppliers in Africa and these goods are shipped directly to the company's warehouse and the goods are usually in transit for up to three weeks. Due to the COVID-19 Pandemic, the company has incurred Rs 1.3 million of expenditure on developing a new range of cleaning products used for dis-infection purposes which are due to be launched into the market place in November 2020. In September 2019, Blister Pharmaceuticals co. also invested Rs 0.9 million in a…
- Holly works for a firm of chartered accountants who specialise in external audit, tax advice, and retail systems. Most of your clients are small retail direct sales companies. A large national company, Rectic Plc, who operate in the same industry as several of your clients have approached you to work on their external audit after a disagreement and challenges faced with the previous auditor. They have offered a fee that would constitute 20% of the total revenue of your firm, but only on the condition that the work was completed within 2 weeks of their year end. Required: a) State and explain the 5 ethical principles outlined by the IESBA (International Ethics Standards Board for Accountants) with examples. b) If your firm accepts this engagement state five key points that must be covered by the engagement letter per ISA 210, then briefly explain the significance of the engagement letter. c) Discuss four potential ethical and other issues that your firm may face in the…Dawson Co’s computerised wages program is backed up daily, however for a period of 3 months the wages records and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries for these 3 months are $32m. Profit before tax is $200m. (i)Briefly give your views on this situations as an auditot (ii)state what type of auditor’s report should be issued and explain your choice.c. Intuit Inc. develops tax preparation software that it sells to its customers for a flat fee. No further Explain when each of the following businesses fulfills the performance obligations implicit in the sales b. Oracle Corp. develops general ledger and other business application software that it sells to its E5-34. a. RealMoney.Com, a division of TheStreet Inc., provides investment advice to customers for an up front fee. It provides these customers with password-protected access to its website, where they 01 Assessing Revenue Recognition Timing and Income Measurem contract and recognizes revenue. Identify any revenue measurement ISsues that could arise can download investment reports. RealMoney has an obligation to provide updates on its they customers. The customer pays an up-front fee for the right to use the software and a monthly its support services. payment is required, and the software cannot be returned, only exchanged if defective. d. Electronic Arts develops and sells…
- You are the audit manager for Ken-Ron Enterprises. Your firm has been the entity’s auditor for 15 years. Your firm normally uses a range of 3% to 5% of income before taxes to calculate overall materiality and 50-75% of overall materiality to calculate tolerable misstatement. Ken-Ron has reported the following financial statement data (in millions) for the last four years: (Data shown in image) Required:a. If you planned on using income before taxes as the benchmark to compute overall materiality and tolerable misstatement, how would you compute those amounts for 2018? Prepare and justify your calculations.b. Determine overall materiality and tolerable misstatement using either total assets or total revenues as the benchmark. Make the calculations by utilizing both .25% and 2%, the endpoints of the range that your firm’s guidance provides.c. Assume that during the course of the 2018 audit you discovered misstatements totaling $50 million (approximately 50% of the 2018 income before…Company has implemented a new “bonus scheme” during the year, whereby the directors would be awarded a bonus of a percentage of the profits for the current year if they could exceed the previous year’s profit by 25%. Required: i). Which component of the Audit Risk Model (ARM) would be affected, and how? ii). Discuss how your audit plan would be affected.You are an audit supervisor of Ali & Babs partners and you are planning the audit of Little Angel Corporation, a listed company, for the year ending 31 March 2020. The company manufactures computer components and forecast profit before tax is GH¢33·6m and total assets are GH¢79·3m.Little Angel Corporation distributes its products through wholesalers as well as via its own website. The website was upgraded during the year at a cost of GH¢1·1m. Additionally, the company entered into a transaction in February to purchase a new warehouse which will cost GH¢3·2m. Little Angel Corporation’s legal advisers are working to ensure that the legal process will be completed by the year end. The company issued $5m of irredeemable preference shares to finance the warehouse purchase.During the year the finance director has increased the useful economic lives of fixtures and fittings from three to four years as he felt this was a more appropriate period. The finance director has informed the…