The fourth standard of reporting states: "The auditor must either express an opinion regarding the financial statements

16-38 (Types of Engagements and Reports) The fourth standard of reporting states: "The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed in the auditor's report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefore in the auditor’s report. In all cases where an auditor's name is associated with financial statements, the auditor should clearly indicate the character of the auditor’s work, if any, and degree of responsibility the auditor is taking in the auditor’s report."

Required:
In each of the following independent situations, indicate how the CPA responds to this standard.
(a) The CPA is engaged to prepare the financial statements for a non-public entity without performing an audit or review.
(b) The CPA is engaged to compile and review the financial statements of a nonpublic company.
(c) The CPA is engaged to prepare the federal and state income tax returns. No other services are provided.
(d) The CPA is engaged to audit the annual financial statements of a public company.
(e) The CPA's name is contained in the client's registration statement that includes audited financial statements for the year ended December 31, 2010, and unaudited financial statements for the three months ended March 31, 2011. The SEC requires the CPA to include in the registration statement consent to the use of the public accounting firm's name in the statement.


Click here for the solution: The fourth standard of reporting states: "The auditor must either express an opinion regarding the financial statements

The fourth standard of reporting states: “The auditor must either express an opinion regarding the financial statements

16-38: The fourth standard of reporting states: “The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed in the auditor’s report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefore in the auditor’s report. In all cases in which an auditor’s name is associated with financial statements, the auditor should clearly indicate the character of the auditor’s work, if any, and the degree of responsibility the auditor is taking in the auditor’s report.”

Required
In each of the following independent situations, indicate how the CPA responds to this standard.
a. The CPA is engaged to prepare the financial statements for a nonpublic entity without performing an audit or review.
b. The CPA is engaged to compile and review the financial statements of a nonpublic company.
c. The CPA is engaged to prepare the federal and state income tax returns. No other services are provided.
d. The CPA is engaged to audit the annual financial statements of a public company.
e. The CPA’s name is contained in the client’s registration statement that includes audited financial statements for the year ended December 31, 2010, and unaudited financial statements for the three months ended March 31, 2011. The SEC requires the CPA to include in the registration statement consent to the use of the public accounting firm’s name in that statement.

Click here for the solution: The fourth standard of reporting states: “The auditor must either express an opinion regarding the financial statements

Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product

Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product. Estimated manufacturing costs as follows:

Capital-Intensive
Direct Materials $5/unit
Direct Labor $6/unit
Variable Overhead $3/unit
Fixed Manufacturing Costs $2,508,000.

Labor-Intensive
Direct Materials $5.50/unit
Direct Labor $8.00/unit
Variable Overhead $4.50/unit
Manufacturing Costs $1,538,000

Introductory unit sales price of $30. Incremental selling expenses are estimated to be $502,000 annually plus $2/unit sold, regardless of manufacturing method.

Instructions:
(a) Calculate the estimated break-even point in annual unit sales of the new product if Gagliano Company uses the: (1) capital-intensive method (2) labor-intensive method.
(b) Determine annual unit sales volume at which they would be indifferent between the two methods.
(c) Explain when both should be employed.

Click here for the solution: Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product