How should governments report their capital projects and debt service activities in their government-wide statements?

Ch 6. Questions for Review and Discussion

6. How should governments report their capital projects and debt service activities in their government-wide statements?

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The following is an auditor's report prepared in accordance with International Standards on Auditing (ISAs)

Auditing P 3-33 The following is an auditor's report prepared in accordance with International Standards on Auditing (ISAs) issued by the International Auditing and Assurance Standards Board (IAASB):

Independent Auditor's Report

To the Shareholders of Les Meridian, Inc.

We have audited the accompanying financial statements of Les Meridian, Inc,. which comprise the balance sheet as of December 31, 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary significant accounting policies and other explanatory notes.

AND SO ON


Required:
a. For each of the seven distinct parts of the standard unqualified report prepared in accordance with generally accepted auditing standards in the United States, describe whether key elements of each of those seven parts are present in hte audit report based on International Standards on Auditing for Les Meridian's financial statements.
b. Describe elements in the audit report based on International Standards on Auditing that are more extensive than an audit report based on US auditing standards.


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The following are selected portions of the report of management from a published annual report

Auditing P 6-21 The following are selected portions of the report of management from a published annual report.

Report of Management

Managements Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its President and Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management evaluates the effectiveness of the Company’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Management, under the supervision and with participation of the Company’s president and Chief Executive Officer and Chief Financial Officer assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007 and concluded it is effective.

Management’s Responsibility for Consolidated Financial Statements
The management of Colgate-Palmolive Company is also responsible for the preparation and content of the accompanying consolidated financial statements as well as all other related information contained in this annual report. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States, and necessarily include amounts which are based on management’s best estimates and judgments.

Required:
a. What are the purposes of the two parts of the report of management?
b. What is the auditors responsibility related to the report of management?


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16-40 (Critique an Audit Report Qualified for a Scope Limitation, LO 3) You are a senior auditor working for Rittenberg & Schwieger, CPAs

16-40 (Critique an Audit Report Qualified for a Scope Limitation, LO 3) You are a senior auditor working for Rittenberg & Schwieger, CPAs. Your staff assistant has drafted the following audit report. You believe the scope limitation is significant enough to qualify the opinion, but not to disclaim an opinion.

To Joseph Halberg, Controller
Billings Container Company, Inc.

We have audited the accompanying balance sheet of Billings Container Company and the related statements of income, retained earnings, and statement of changes in financial position as of December 31, 2007. These financial statements are the responsibility of the Company's management.

Except as discussed in the following paragraph, we conducted our audit in accordance with accounting principles generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain assurance about whether the financial statements are free of misstatement. An audit includes examining evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We were unable to obtain sufficient competent evidence of the fair market value of the Company's investment in a real estate venture due to the unique nature of the venture. The investment is accounted for using the equity method and is stated at $450,000 and $398,000 at December 31, 2007 and 2006, respectively.

In our opinion, except for the above-mentioned limitation on the scope of our audit, the financial statements referred to above present fairly the financial position of Billings Container Company as of December 31, 2007 and 2006, and the results of its operations and its cash flows for the year then ended in conformity with auditing standards generally accepted in the United States of America.

/s/Bradley Schwieger, CPA

St. Cloud, MN
December 31, 2007

Required:

Identify the deficiencies in this draft, and state how each deficiency should be corrected. Organize your answer around the components of the audit report (introductory paragraph, scope paragraph, and so on).


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Margaret started her own business in the current year and will report a profit for her first year

Margaret started her own business in the current year and will report a profit for her first year. Her results of operations are as follows:

Gross income $50,000
Travel 1,000
Transportation 6,173 miles, using standard mileage method
Entertainment in" total 4,000
Seven gifts at $50 each 350
Rent and utilities for apartment in total 10,000
(20% is used for a home office)

What is the net income Margaret should show on her Schedule C? Show the calculation of her taxable business income.


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We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively

We record and report most changes in accounting principle retrospectively, but sometimes report the changes prospectively. Explain when it is appropriate to report the changes prospectively. Provide examples.

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At what value would a government report bonds payable on its government-wide statements?

At what value would a government report bonds payable on its government-wide statements? Why might this value differ from the bonds' face value? Why might it differ from their market value?

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