Yorkville Unit 6 Auditing Suggestions to Improve BBI Module Paper The assignments are more on the auditing side. I need this two assignments done separatel

Yorkville Unit 6 Auditing Suggestions to Improve BBI Module Paper The assignments are more on the auditing
side. I need this two assignments done separately and please follow all the instructions carefully and ensure top notch work. No plagiarism please, and no grammar typos. ensure you fomart according to the instructions. Note carefully that these are two separate assignment ensure you submit them in different documents please. Objectives
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To identify and assume an assigned role.
To identify and rank the importance of explicit issues.
Illustrate the importance of hidden (undirected) issues that arise from a detailed analysis.
To identify accounting issues (financial accounting, managerial accounting, finance, auditing), assess their
implications, generate alternatives, and provide recommendations to meet the client’s needs.
To examine how accounting standards impact financial measures.
To prepare a coherent report and integrated analysis that meets specific user needs.
Instructions
1. In order to complete your case analysis successfully, you must
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identify the role you are playing;
assess the landscape, considering the user needs, constraints, and business environment;
identify the issues;
analyze the issues (qualitatively and quantitatively); and
provide a recommendation and conclusion for each issue.
2. An average grade will result from answering all questions with basic coverage and accuracy, showing all
your work. Additional points come from including greater detail, astute, informed commentary where
appropriate and connections to readings and other content.
3. Respond in a single Word doc (or comparable text editor.)
4. Click here to review Unit 6 Integration Case Questions.
Tips for Approaching Select Indicators Within a Case:
Tip 1: Weakness/Implication/Recommendation (WIR)
When a case asks you to analyze/identify control weaknesses and make recommendations, the best approach to
use is provide the weakness, implications and recommendations for each situation identified. For example, in
Unit 4, students are asked to “provide him with a report which contains an analysis of Swiss Sub’s operations
and any changes you think would improve the operations. The W/I/R format is the most appropriate strategy to
use in order to maximize your grade. Let’s discuss each of these components in turn:
Weakness: Students should use case facts to identify and describe the weakness. An example from Case 1
(Unit 4) is that the security cameras are not operating correctly with employees being aware of this fact.
Implication: This answers the “so what” of the weakness. Here students must state what will continue to go
wrong if the weakness is not resolved. If you look at the Financial Statements, can amounts be misstated? Will
the business lose cash or will fraud occur? Using the Case 1 example of the un-operational security cameras,
although they may prevent customers from trying to steal from the store, it will not deter employees from
doing so if there is knowledge the cameras are not working.
Recommendation: Here students will provide a suggested solution to the program. You must provide a
control that is specific and practical given the circumstances. To conclude on the security camera example, an
appropriate recommendation would be to fix the store cameras and begin recording activity once again.
When you compile this W/I/R, here is what it should look like:
Security Cameras
Weakness: The security cameras are not operating correctly and employees are aware of this fact
Implication: Un-operational security cameras will not deter employees from stealing if there is knowledge the
cameras are not working.
Recommendation: Fix the store cameras and begin recording activity once again.
Tip 2: Preliminary Audit Planning
Some cases may ask students to conduct preliminary audit planning. For example, in Unit 6, “YU CPA
student, I could really use your help in preparing a preliminary audit plan.”. While there are a few different
approaches for creating the audit memo, the most common approach is to use RAM (Risk, Approach and
Materiality). You should have a separate heading for each of these sections of the audit memo. Let’s discuss
each of these components in turn:
Risk: Your first sentence should be to state what audit risk is classified as (high/medium/low). Audit risk,
according to your textbook, is the risk that the financial statements are materially misstated after a clean audit
opinion is given. It is calculated as Audit Risk = Inherent Risk * Control Risk * Detection Risk. Once you
make a classification, students need to support their conclusion with evidence from the case. For example:
Audit risk is high in this case as a result of:
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This is a new client to the firm
There are complex accounting issues which may be prone to error
Accounting errors or fraud were identified
New management may have a bias to misstate
The company has made the declaration to go public
Weak controls were discovered or problems were reported by employees with financial information
Approach: There are three options you have to choose here: substantive approach (you will be reviewing
transactions), control reliance (you are relying on controls) or a combined approach (for some areas you will
rely on controls). Overall if you identify weak controls all around in the organization, the best approach is a
substantive approach and to support it with information from the case. However, if all controls are functioning
adequately, a combined approach may be best with a substantive approach in the weak areas.
Materiality: Materiality is a number which you must calculate and state why you are calculating it a certain
way. Your textbook outlines the different rates for materiality such as 5% of net income from continuing
operations or 0.5-2% of revenues/expenses for Non-for-profit entities. However, before you make the
calculation, it is important to remove any accounting errors, accounting fraud or one time transactions from net
income.
In addition, students must also identify the users who will be relying on the financial statements as part of the
materiality discussion. Identifying users is important because materiality is related to users and not to risk so
be clear why you’re setting materiality.
Tip 3: Analyzing Accounting Issues
When asked to analyze accounting issues, such as during the Unit 6 case, “Can you please prepare a memo
analyzing any new accounting issues that resulted from 2016 events that we should be keeping an eye for
during our audit?”, the following framework is a good approach for dealing with each accounting issue.
1. Identify the issue.
2. Consider whether the accounting treatment was correct. Here you can use case facts and accounting
rules you have learned through each of the accounting courses at YU.
3. Identify if there are valid alternative treatments. If there are, discuss the alternatives. If not, discuss the
appropriate treatment with reference to the correct technical rules.
4. Recommend and conclude. Choose the best alternative, considering user needs and reporting objectives,
and provide your recommendation.
CASE
Events occurring in 2016 Telephone support program
Up to 2016, no companies in the industry offer post-sales support to labs. In an attempt to provide
better client service and in order to remain competitive, BBI introduced a new aspect to their modules.
Starting January 1, 2016, when a lab purchases a module, they now receive a three-year helpline
support service. The service provides them with access to a 1-800 hotline they can call 24 hours a day, 7
days a week in order to seek advice from a qualified statistician.
In order to cover the costs of running the helpline, BBI increased their pricing on the modules by 10%. As
a result, BBI had sales of $1,430,000 this year, representing a 20% increase in their revenues compared
to the prior year, so it was clear that the market liked the new feature and was willing to pay extra for it.
Had the same amount of modules been sold in the prior year, sales would only have been $1,300,000. At
yearend, the full $1,430,000 was received and recognized as revenue for the year. Module Nuclear
At the request of several clients, BBI started “Module Nuclear”, a project on the development of a
module specifically for nuclear plants. There was a need for software that would analyze data coming
from nuclear reactors in real time in order to continuously assess their condition. The timeline related
to this project is as follows:
Date Work completed on project Amount spent to date (cumulative)
February 2016 Project began February 2016 – April 2016
Various algorithms were explored to determine which one would be best for nuclear plants
$30,000
April 2016 – July 2016
One algorithm was chosen and programming for the module was done
$50,000
July 2016 – August 2016
Testing of the module. The module often crashed as it needed to provide real-time analysis, 24-hours a
day, and this was BBI’s first time creating a module that constantly refreshes.
$5,000
August 2016 – October 2016
Continually testing different fixes to resolve the crashing issue. By mid-October, the programmers finally
isolated the problem and developed a solution, which involved additional coding changes to the
software which were complete by the end of October.
$15,000
WWW.YORKVILLEU.CA
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October 2016 – December 2016
Programming to link the module to the shell. $20,000
The project team expects the module to be finished within the first three months of 2017. The budget
for the remainder of the project is $30,000; $25,000 will be spent on testing the software with various
sets of actual client data, and $5,000 will be used for advertising and hosting a client reception to unveil
the new module. BBI has capitalized all expenses incurred on the project to date. Genetic Network
Module
BBI’s Genetic Network Module has been one of the company’s top 20 modules in terms of sales. The
company spent approximately $240,000 in early 2015 on the development of this module, and has been
amortizing it over its estimated useful life of 3 years. In 2016, a competitor, Beta Gamma Corporation
(BGC) came up with a stand-alone software which is very similar to BBI’s module in terms of
functionality. It can perform the data analysis in half the amount of time, although not with as much
accuracy. When the BGC product came out, BBGC offered to purchase BBI’s Genetic Network Module
for $50,000. Since the introduction of the competitor software, BBI’s sales of the Genetic Network
Module have declined by 90%. At the end of 2016, the net book value of the deferred R&D costs related
to this project is $95,000.
Instructions
Answer the following Theory Questions based on the individual instructions for each case.
Unit 6 Theory Questions – Working on an Audit Plan
Greener Pastures (GP) is a not-for-profit organization that operates a nursing home in Huntsville, Ontario. You
are auditing the revenue and receivables at GP. The nursing home has a reputation for delivering excellent
patient services, but its accounting department is understaffed and does not have time for internal verification
or other accuracy checks. Your assessment of controls over cash receipts indicates that there are effective
management supervision and monitoring procedures in place, and you have found no indication of fraud risk,
but past audits have found misstatements in recording the patient invoices and accounts receivable. In
confirming the accounts receivable from patients in past audits, you have had a very low response rate.
Furthermore, those patients who did respond did not appear to know what information they were being asked
to provide or what their correct outstanding balance actually was. You have had the same experience in
confirming receivables at other nursing homes. The nursing home has a large bank loan payable, which is up
for renewal two months after year-end. The bank’s loan officer has told management the bank’s head office
may not approve a renewal. The bank is concerned about its exposure to not-for-profit nursing homes because
many new government- funded nursing homes are expected to open over the new few years. These new longterm care facilities will be more modern and will be located closer to many large hospitals than GP.
Required (max 1 page, single spaced, bullet points are acceptable):
1. Identify the business risks in GP.
2. Assess the risk of material misstatement at the overall financial statement level. Identify the inherent
and control risk factors in the organization to support your assessment.
3. In the audit of the revenues, explain the overall audit approach you would use to obtain sufficient
appropriate evidence in this situation. Give clear reasons for the mix of control and substantive work
you would plan to do. Describe the substantive tests you would perform to audit the revenue
transactions in this organization. Be specific and show how the tests tie in to the relevant assertions.

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