Audit Analysis

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The Lakeside Company: Case Studies in Auditing
Summary of Introductory Case and Case 1 I. Introductory Case: A look inside a CPA firm A. Abernethy and Chapman 1. Began operations in 1969 2. 145 employees 3. Main office in Richmond, Virginia with 3 branches elsewhere in Virginia. 4. In Richmond: 10 partners, 14 managers, 21 seniors, and 42 staff auditors. 5. Tax = 11; advisory services 7; remainder usually focus on accounting and auditing services. 6. During busy times - may work in other areas. 7. 18 secretaries and other clerical staff. B. Hiring policies 1. College graduates with major in accounting. 2. Must sit for CPA exam within one year of hire date. 3. Complete 40 hours of CPE per year. 4. Promote based on seniority and technical competence. 5. Must be with firm at least two years, pass CPA exam before promotion to senior. C. Quality control standards 1. Responsibility of DeAnna Malott. 2. Training seminars on company policies. 3. Policy to sever all financial ties to clients. 4. Assigns personnel to audit and other engagements. 5. Considers experience with client's business and technical training. 6. Audits require both a consulting partner and a partner-in-charge. 7. Supervision, objectivity, and competence. D. Engagement team 1. Partner-in-charge - final decisions, not much of the work 2. Manager - on site decision-maker. 3. Senior - completes majority of work. 4. One or more staff auditors - completes majority of work. 5. Consulting partner - advises and reviews the final work to assure applicable professional standards and regulatory requirements followed. E. General 1. Much growth in last five years - marketing strategy and high-quality audits and other accounting work. 2. Revenues over $2.5 million 3. Profits to partners ranged from $65,000 to $200,000. 4. Revenues: 60% audit, 25% tax, 15% other accounting, attestation and consulting services. 5.…...

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