Premium Essay

Anne Aylor Inc

In: Business and Management

Submitted By uscbaseball32
Words 1406
Pages 6
Accounting 732
Audit II
9/25/2012
Anne Aylor Inc.

A. Why are different materiality bases considered when determining planning materiality?

Different materiality bases are considered when determining planning materiality because the magnitude and nature of financial statement misstatements or omissions have different influences on different financial statement users. For example, investors are more interested in the accuracy of numbers involving net income because they are mainly concerned with the company’s ability to increase shareholder wealth. For an audit company, the primary concern when planning materiality is to take into account all expected financial statement users. These different expected users all have different concerns in regards to where financial statements contain misstatements. Debtors such as banks who provide loans to help companies like Anne Aylor raise capital are mainly concerned with company’s maintaining debt covenants involving current assets. Anne Aylor has a debt covenant to maintain a current ratio over 2.0, which according to the company’s projected 2012 balance sheet, will not be met. These debtors are more concerned with Anne Aylor overstating assets or understating liabilities in order to meet these debt covenants and avoid potential interest rate changes.

B. Why are different materiality thresholds relevant for different audit engagements? Different materiality thresholds are relevant for each audit engagement because various industries contain more risk than others. Also, certain companies have varying amounts of risk due to their history of past misstatements and past year’s financial health of the company. For example, Smith & Jones uses different tolerable misstatement percentage thresholds that are based solely on the likelihood of management committing fraud. Donna Fontain, through conducting…...

Similar Documents

Premium Essay

Anne Aylor Case

...Anne Aylor Case [a] Why are different materiality bases considered when determining planning materiality? Financial information have a lot of different areas and its now equally important for its users. In the case of auditor, based the preliminary procedures performed and the nature of the entity, only some areas that he would need to be focus on. [b] Why are different materiality thresholds relevant for different audit engagements? Materiality is not an absolute concept but rather based on professional judgment. Therefore the materiality threshold will vary depend on the situation of the entities and different important audit areas of entities. [c] Why is the materiality base that results in the smallest threshold generally used for planning purposes? In order to give a reasonable assurance for the financial statements are free of material misstatement, the auditor have to design the audit using the smallest threshold to detect the smallest misstatement possible. [d] Why is the risk of management fraud considered when determining tolerable misstatement? If management is intentionally trying to misstate the financial statements it is likely that misstatements will be systematically biased in one direction. On the other hand, if management is not trying to misstate the financial statements it is......

Words: 351 - Pages: 2

Premium Essay

Anne Aylor Case

... |Tolerable misstatement | |Current Liabilities |$4,750 | |Explanation: Because the terms of First Bank require Ann Aylor to maintain a Current ratio of 2.0, the Current Liabilities account | |requires lower tolerable misstatement. The projections posted now put the current ratio at only 1.95, already under the agreed ratio. It| |would take a decrease in current liabilities of $4,750 to bring the current ratio to 2. This is the main reason Current Liabilities | |requires a lower tolerable misstatement. The terms also agreed on maintaining a quick ratio of at least 0.8. Current projections put the| |company’s quick ratio at 1.26. It would require a large change of 112,925 to current liabilities for the quick ratio to fall under 0.8 | |Current Assets |$9,500 | |Explanation: : Because the terms of First Bank require Ann Aylor to maintain a Current ratio of 2.0, the Current Assets account requires| |lower tolerable misstatement. The projections posted now put the current ratio at only 1.95, already under the agreed ratio. It would | |take a increase in current liabilities of $9,500 to bring the current ratio to 2. This is the main reason......

Words: 746 - Pages: 3

Free Essay

Anne Sexton

...Honors American Author Essay In an interview, Anne Sexton claims, “Poetry is my life, my postmark, my hands, my kitchen, my face.” (“Anne Sexton Quotes Quotable Quote”). This statement accurately describes Anne Sexton’s life considering she wrote approximately 14 books of poetry while she was alive. Anne Sexton was born on November 9th, 1928 in Newton, Massachusetts and died on October 4th, 1974 in Weston, Massachusetts and was also was most closely associated with the Confessional Movement of the early to mid 20th century. Anne Sexton’s dark, deranged, and personal thoughts fit perfectly with the other writers that took part in the Confessional Movement but her poem, “Young” takes her to her parallel universe that she so hopelessly wished she lived in. The poem “Young” by Anne Sexton was part of her book of poems, All My Pretty Ones which was published in 1962. Throughout some of her poetry, including “Young” it is not so obvious to see why she was part of the Confessional Movement. When one reads the poem “Young” it can easily be interpreted that it is about a lonely young girl on a starry summer night, lying outside on the grass, thinking about how she is transforming from a child into an adolescent. It also touches base on what she used to believe as a child and what she knows is real now. There is almost a sense of mourning when she realizes that her old thoughts are not what they seem, especially when she speaks of God. One can also conclude that she’s dealing with...

Words: 1833 - Pages: 8

Premium Essay

Ann Aylor

...Facts: Anne Aylor, Inc. sells classic, high-end fashion in the retail industry in approximately 584 locations in 46 states. Most of their merchandise is developed and designed within the company. They use 131 independent manufacturers in 19 different countries, including China, Philippines, Indonesia, India, and Vietnam. The stock was trading at $22.57 at the end of March, 2011. 1a) Materiality is different depending on the users of the financial statements (AS11). Debt and liquidity is more important to creditors and stockholders are more concerned with net earnings and growth. Establishing the overall audit strategy for the engagement and developing an audit plan is dependent on the type of users (AS9). An objective is to reduce risk (AS8); therefore, inherent risk is assessed before considering control risk. 1b) Thresholds are different based on the industry and the magnitude of that particular company. Materiality is much different in a small company in comparison to a significantly large company. Preliminary judgments about the effectiveness of internal control over financial reporting have an effect on the planning of the audit (AS5) in regards to materiality. 1c) The smallest materiality threshold used for planning is used to “provide reasonable assurance (AU230) that the financial statements taken as a whole are fairly presented in all material respects at the lowest cost.” 1d) Obtaining an understanding of the company, its environment, and internal......

Words: 610 - Pages: 3

Premium Essay

Anne Boleyn

...Ana Bolena – Anne Boleyn 1501(1507)-1536 Queen of England 1533-1536 Mother of Elizabeth I Information about the early years of Anne Boleyn is almost non-existence; her birth has been dated from 1501 to 1507. Although information about her parents is abundant. Her father, Sir Thomas Boleyn, was named Sir in 1503. He was fluent with the languages, which allowed him to travel through Europe under the King’s orders and be part of important meetings. He was one of the bodyguards that took the Archduchess Margaret to Scotland, and he participated in various meetings with Charles V. Her mother, Isabel Howard, came from a family of Dukes, although the title had been taken away in 1485, it was given back in 1514. At age 12, Anne was sent to the court of the Archduchess Margaret to be a fille d’honneur. Here she learned French and how to be part of the court. The Archduchess wrote a letter to Sir Thomas telling him what a wonderful daughter he had, and how graceful she was of having her in her court. In 1514, Anne went to France to be part of the court of the Queen Mary, the sister of the King of England. But Queen Mary soon returned to England and Anne stayed in France being part of the new Queen’s Court (Queen Claudia). In France she was educated as a French girl, she learned and love their poetry, music, clothes; she was considered one of them. In 1521 Anne returned to England, because she was getting married. While her marriage was arranged, she became part of Queen...

Words: 937 - Pages: 4

Free Essay

Anne Bronte

...British Literature March 8, 2012 Anne Bronte Anne Bronte was the youngest of the Bronte family members, and a remarkable British poet, even though her sisters overshadowed her talent. She had a very short life, born in January 17, 1820 and died in May 28, 1849 form tuberculosis.  Anne and her family lived through many difficult experiences like the death of her mother Maria Branwell Bronte, followed by the death of her older sisters, and how Anne suffered from the illness that ultimately took her life. Due to these unfortunates losses Anne’s father Patrick Bronte decided to educate his children at home in an environment were they are less exposed to illness. However, he did not raise the Bronte children alone, he had the help of his wife’s sister, Elizabeth Branwell. Anne was very close to her siblings because they had little contact with the outside world, and together they went through many joyful moments. Anne and sister Emily had a strong bond and she influenced Anne’s writing because they wrote poems together. The Bronte sisters used poetry to express their feelings and thoughts. Within Anne’s poems “Farewell”, “A Hymn”, “My God! O Let Me Call Thee Mine”, “Weep not much”, and “In Memory of a Happy Day in February”, the reader can identify aspects of Anne’s radical character. Anne’s poems are considered controversial for the time period in which they were written because she talked about divorce and questioned God. People today can identify with her poems...

Words: 1712 - Pages: 7

Premium Essay

Anne Aylor Case

...How to improve and maintain the independence of external auditors Auditor's responsibility is to give advice based on the company's annual financial statements. A company will work with the auditor's annual report of the decision. So this is an important auditor to provide accurate reports. (Dr Jill, Professor Robin)[online] An independent auditor to give the opinion that is no other factors. It includes human, economic, monetary, and so on. Their view is that there is no limit, and give them the freedom to express their views based on their expertise. Besides, they must be clear and to ensure no errors in the opinion. As they say is a company in important business decisions. Although this is the advice given by person, but as a professional auditor should reduce accidents. Professional auditor must be independent of its work. When problems occur, they must be the cooling time and the time taken to solve the problem, without any confusion. An independent auditor must be a smart, intelligent person. Because they know how to handle and solve their own problems without people help. Code of ethics Code of ethics is formed to help the auditors aware to the areas where ethical pressure may exist and be in dependent all the time. Independent auditors are not only responsible to their client but also the public interest. Therefore, they should follow the code of ethics. (Sagar, Mead, Bampton, 2008) There are some fundamental principles in code of ethics which must followed by......

Words: 1787 - Pages: 8

Premium Essay

Anne Boleyn

...Informative Speech Assignment The Life of Anne Bolyen I. Introduction A. Anne Boleyn was the sister of King Henry VIII mistress and the first English queen to be publicly executed. B. While Anne may have been thought to be a promiscuous and power hungry woman, she did many good things that positively impacted England. C. Anne Boleyn helped shape England’s history in ways that was not imagined by anyone. D. In this speech I am going to talk about Anne’s rise to power, her reign of England, and her fall from power. Transitional Statement: Anne managed to rise from someone in the high working class to someone who was revered by some as a Queen. II. Rise to Power A. Early years 1. Netherlands 2. France 3 Reason for return B. King Henry VIII's court 1.Henry’s attention/treatment 2. Political position 3. Anne pregnancy Transitional statement: As queen Anne accomplished many things that greatly impacted England. III. Reign of England A. Marriage to Henry VIII 1. Annulment of marriage to Catherine 2.Separation from Roman Catholic Church B. Anne’s influence on Henry 1. The beheading of close friends of the king, Cardinal Wolsey, John Fisher, and Sir Thomas More. 2. Dissolution of monasteries ......

Words: 390 - Pages: 2

Premium Essay

Anne Aylor Case

...ACG 4010 Module 5 Project Assignment The three jobs that I chose in my business choice are: 1. An order for a custom dining room table 2. An order from a distributor for 20 modular living room sets,(couch, loveseat, chair) 3. An order for a modular wrap around couch and custom coffee table. Job 1 the custom dining room table will need to have the cost figured using the Job Costing System. I will use the 7 steps in order to determine the cost allocations for the job. I will then complete a Job Cost Sheet. I will breakdown the materials needed, the price for the salary of the designer, the labor and the overhead. After that I can then determine how much the job will cost and in turn the amount to charge the customer in order to make a profit. Job 2 is purely s manufacturing job. I will use the process costing system. The 7 step from the order to identifying costs, selecting an allocation base, establishing indirect costs, computing the rate based on prior jobs completed, computing the indirect costs and then computing the total costs so that I can determine the cost to the customer. Job 3 is a combination job which I will use both the Job Costing System and the Process Costing System because part of the job is manufacturing like items and part of the job is designing a custom coffee table then manufacturing multiple units of that table. Again I will use the seven step process in order to determine the cost per unit and what to charge the customer in order to......

Words: 277 - Pages: 2

Free Essay

Anne Frank

...” This quote is by Anne Frank, a girl of Jewish descent who experienced first hand the harsh realities of the Holocaust. The Holocaust was a catastrophic event that shook the entire world, as Adolf Hitler demanded the execution of several million European Jews. Hitler deemed the Jews as those of an inferior race who served as a threat to purity of the German community according to history.com. On biography.com it indicated that Anne’s real name was Annelies Marie Frank. It also stated that she was born on June 12, 1929. She was born in Frankfurt, Germany but as anti-semitic pressures increased in their home country they moved to the Netherlands. Anne lived with her two parents and her sister, Margot, in Amsterdam in the time leading up to Nazi Occupation preceding WWII. During World War II, Anne Frank and her family went into hiding along with another family when she was thirteen as to avoid persecution by the Nazis. They remained in hiding for two years, during which Anne documented her thoughts and feelings into a red-checkered diary that she received for her 13th birthday. This diary became the famous work we know today as The Diary of Anne Frank. The Frank family’s hiding place was discovered when she was fifteen and her entire family was shipped to the Auschwitz death camp. Her family was then separated and sent to different concentration camps. Anne and her sister were originally with their mother until they were separated again. Anne and Margot were then......

Words: 612 - Pages: 3

Premium Essay

Anne Aylor

...Skills, Responsibilities and Roles of the Management Accountant Today's Management Accountant Skills, Responsibilities and Roles in Today's Global Economy Jennifer Dosch, CMA Metropolitan State University Chapter Goal: To demonstrate the skills necessary for management accountants in today's business environment. To identify and explain the responsibilities and roles for today's management accountant. Learning Objectives  Demonstrate the differences between management and financial accounting.  Describe important skills needed for today's management accountant.  Examine responsibilities of the management accountant.  Examine the roles required of today's management accountant.  Summarize IMA's Code of Ethics for management accountants. Jennifer.Dosch@metrostate.edu Page 1 Skills, Responsibilities and Roles of the Management Accountant I. Overview of Accounting The two primary accounting roles in an organization are “financial” and “management” accounting. The recording of transactions and preparing financial reports is the financial accounting role. Financial accounting deals with historical results, the recording and reporting of transactions that have occurred. For example, paying cash for salaries expenses incurred or recording the purchase of raw materials. The recording of transactions and preparation of financial statements are currently guided by Generally Accepted Accounting Principles (GAAP). GAAP consists of standards......

Words: 4967 - Pages: 20

Premium Essay

Ann Aylor, Inc

...AC*411 Fall 2015 Professor Sheikh Your Name (TYPE with Last Name First e.g., SHEIKH, Aamer): _QUIJANO, Camila _____ BBGP Case 7.1 Ann Aylor, Inc. Determination of Planning Materiality and Performance Materiality Be sure to delete any notes to yourself and to proofread and spell check this document before you turn it in. Print out the entire document (single-sided), staple it, and bring it to class to turn in at the beginning of class on Thursday, November 19. I pledge that, outside of class, I have worked on this case completely independently, and that, outside of class, I have given neither assistance or suggestions to anyone else nor received assistance or suggestions from anyone else in the process of completing this case. Pledge (handwritten signature in pencil):__________________________________ Date (handwritten in pencil):_____________________ Answer the following questions ONLY: Question [1]: Review Exhibits 1 and 2; audit memos G-3 and G-4; and audit schedules G-5, G-6 and G-7. Based on your review, answer each of the following questions: [a] Why are different materiality bases considered when determining planning materiality? [b] Why are different materiality thresholds relevant for different audit engagements? [c] Why is the materiality base that results in the smallest threshold generally used for planning purposes? [e] Why may the auditor use a different performance materiality amount or percentage of......

Words: 714 - Pages: 3

Premium Essay

Ann Aylor Inc

...AC*411 Fall 2015 Professor Sheikh Your Name (TYPE with Last Name First e.g., SHEIKH, Aamer): BRADY, Jack BBGP Case 7.1 Ann Aylor, Inc. Determination of Planning Materiality and Performance Materiality Be sure to delete any notes to yourself and to proofread and spell check this document before you turn it in. Print out the entire document (single-sided), staple it, and bring it to class to turn in at the beginning of class on Thursday, November 19. I pledge that, outside of class, I have worked on this case completely independently, and that, outside of class, I have given neither assistance or suggestions to anyone else nor received assistance or suggestions from anyone else in the process of completing this case. Pledge (handwritten signature in pencil):__________________________________ Date (handwritten in pencil):_____________________ Answer the following questions ONLY: Question [1]: Review Exhibits 1 and 2; audit memos G-3 and G-4; and audit schedules G-5, G-6 and G-7. Based on your review, answer each of the following questions: [a] Why are different materiality bases considered when determining planning materiality? [b] Why are different materiality thresholds relevant for different audit engagements? [c] Why is the materiality base that results in the smallest threshold generally used for planning purposes? [e] Why may the auditor use a different performance materiality amount or percentage of account......

Words: 716 - Pages: 3

Premium Essay

Anne Aylor Case Solution (Audit)

...7 Planning Materiality C a s es inc lu de d in t his Se ction 7.1 Anne Aylor, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Determination of Planning Materiality and Tolerable Misstatement O t he r c ase s t h at discuss topics rel ated to this section 5.6 Sarbox Scooter, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . . Evaluation of Audit Differences . . . . . . . . . . . . . . . . . . . . . . . 369 12.2 Auto Parts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379 Considering Materiality When Evaluating Accounting Policies and Footnote Disclosures Instructor Resource Manual — Do Not Copy or Redistribute Instructor Resource Manual — Do Not Copy or Redistribute Anne Aylor, Inc. C a s e 7.1 Determination of Planning Materiality and Tolerable Misstatement Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt Ins tr uc t ional O b je c t ive s [1] To provide experience with establishing planning materiality. [2] To provide experience with establishing tolerable misstatement for individual financial statement accounts. [3] To illustrate factors considered when establishing planning......

Words: 1971 - Pages: 8

Premium Essay

Anne Aylor Case

...[1] a) Looking at Exhibit 1 it says that “the magnitude and nature of financial statement misstatements or omissions will not have the same influence on all financial statement users” (p.11). With that it is clear why different materiality bases are considered because a misstatement on one account on the financial statement may be of more importance to one particular type of user while or the other it is irrelevant. b) An example given at the bottom of Exhibit 1 explains why it is important to have different thresholds for different audit engagements. “If a client is close to violating the minimum current ratio requirement for a loan agreement, a smaller planning materiality amount should be used for current assets and liabilities. Conversely, if the client is substantially above the minimum current ratio requirement for a loan agreement, it would be reasonable to use a higher planning materiality amount for current assets and current liabilities” (p.11). This makes sense because it is unfair to audit a small company under the same materiality thresholds as one would do with a significantly large company. c) Once again looking at Exhibit 1 on page 11, the very last paragraph on that page states why it is important to generally use the smallest threshold for planning purposes. It is because the smallest amount provides reasonable assurance that the financial statements, takes as a whole, are not materially misstated for any user. It is to be conservative with......

Words: 672 - Pages: 3

Goebel Eule - Waldohreule - 8,0 cm - glasierte Porzellanfigur | Siemens phones | КняZz