[SOLVED] Introduction: Garcia and Foster, CPAs, is a

Introduction: Garcia and Foster, CPAs, is a regional firm with 20 offices located in large cities throughout the western United States. As part of its quality control procedures, the firm chooses 5 offices each year and conducts an internal inspection of a completed audit engagement. The internal inspection process helps Garcia and Foster ensure the consistent application of audit firm practices and auditing standards, and efficiently modifies firm practices to improve audit quality and reduce the likelihood of an audit failure.

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Alpine Cupcakes, Inc. Audit Case Assignments Garcia and Foster. CPAS, and Their 20X2 Audit of Alpine Cupcakes, Inc. Introduction: Garcia and Foster, CPAS, is a regional firm with 20 offices located in large cities throughora the western United States. As part of its quality control procedures, the firm chooses 5 offices eno o and conducts an internal inspection of a completed audit engagement. The internal inspection process helos Garcia and Foster ensure the consistent application of audit firm practices and auditing standards and efficiently modifies firm practices to improve audit quality and reduce the likelihood of an audit failure Garcia and Foster Audit Process 1. Slep 1 is audit planning, in which the audit team develops the auditing strategies and procedures for the client after the auditor has considered client acceptance or continuance. The audit team assesses the previous year's audit program and revises it as needed for the current year's engagement, In addition, the firm sends an audit engagement letter to the client, establishing the services that the firm will provide to the client. Once signed by the client, this letter acts as a contract between the audit firm and the client. 2. Step 2 requires the audit team to obtain and document its understanding of the client's environment. including internal controls. This understanding allows the auditors to identify significant risks in the audit engagement. During this phase, the auditors determine materiality and perform preliminary analytical procedures. 3. In Step 3, the audit team uses information obtained in Step 2 to determine the risks of material misstatement on the audit engagement-both overall financial statement risks, and risks at the individual account level. These risk assessment procedures guide the auditor in altering, if necessary, the audit program in response to the assessed risks. 4. Next, in Step 4, the audit team tests internal controls and performs substantive procedures to obtain the audit evidence needed to form an opinion on the financial statements. 5. In Step 5, the auditor performs additional procedures typically done at the end of the audit, such as searching for unrecorded liabilities, reviewing attorneys' letters, and obtaining a management representation letter from the client. The auditor reviews the overall audit evidence and conclusions to determine the audit opinion. 6. Finally, the auditor issues the audit opinion. After the engagement is complete, planning can begin for next year's audit (Step 1). tep Aud Plaing Step 2 Hep Provide out opinion Undertand chet environment& controh Audit Plan Garcia & Foster Audit Firm Methodology Step S Complete the Gudt Hep Assess thle & design audt procedures tep 4 Perform TOC A Subtontive Procecures Objective: You are a senior audit manager with Garcia and Foster, based in the Salt Lake City, Utah office. You are in charge of conducting an internal inspection of the Denver, Colorado office. As part of Alpine Cupcakes, Inc. Audit Case Assignments your work, you are examining and evaluating the audit evidence and documentation for the 2 Alpine Cupcakes, Inc. Risk Assessment Module The risk assessment module focuses on several important assessment procedures. One of the ma objectives of this module is to have you review and gain a better understanding of preliminary procedures. Through reviewing these documents, you will see real world audit workpapers and hant opportunity to assess the auditors' performance of the required procedures. In addition, you will be to consider Alpine Cupcake's overall financial statement risk and the account level risks as you reit workpapers. The audit workpapers also include audit documentation on the auditors' materiality calculations and overall risk assessment of inherent risk, control risk, and detection risk. Through ts module, you will gain a better understanding of the auditors' considerations of dient risk and how this Introduction: assessment affects the audit. Learning Objectives: The goal of this module is to enable you to understand the auditors' audit planning and risk assessment procedures. After performance of the module, you will be able to: 1. Assess the auditors' documentation of their understanding of the client's environment, inclute internal controls. 2. Review and evaluate the auditors' materiality threshold calculations. 3. Understand and apply the audit risk model. 4. Review and evaluate the auditors' preliminary analytical procedures. 5. Evaluate the auditors' documentation of their risk assessment procedures. 6. Conduct research on auditing standards for audits of nonpublic companies. Assignment: Before beginning the assignment, take a moment to look through the papers in this module. Note in the lower left-hand corner that some documents are audit work papers created by Garcia and Foster CPAS as they conducted the audit. Note that other papers are client documents that Garcia and Foster collected and kept in support of their audit. Finally, note the numbering system in the lower right-hand corner of each page and how each paper within the audit is numbered and linked back to the audit program. In this part of your assignment, you will examine the firm's audit documentation in relation to the auditors performance on several risk assessment procedures. Please complete the following tasks: Q1. Research, cite, and summarize (in one or two sentences per standard identified) the auditing standards as they relate to the auditors' responsibilities in the following areas: a. Obtaining and documenting an understanding of the client's environment, including internal controls. b. materiality assessment in planning and performing the audit. The audit risk model. d. Preliminary analytical procedures. 02. Evaluate Garcia and Foster's documentation of their understanding of the client's environment (workpaper B.2.1.) Describe any problems you find and provide suggestions for improvement. This question relates to Step 2 of the Garcia and Foster Audit Plan. C. Q3. Review Garcia and Foster's calculations of materiality thresholds for the 20X2 Audit (workpaper B211Determine if the auditors correctly appliled the matenality concept in their risk assessment procedures. Describe any problems you find and provide suggestions for improvement Thiont relates to Step 2 of the Garcia and Foster Audit Plan. 04. Evaluate other aspects of the audit risk Assessment memo (workpaper B.2.1.) In partieulee the auditors' application of the audit risk model and brainstorming processes. Describe any problems you find and provide suggestions for improvement. Identify and document any additional problems you discover with the memo. This question relates to Step 3 of the Garcia and Foster Audit Plan. Q5. Evaluate the preliminary analytical procedures completed by Garcia and Foster, CPAS (workpapers B.3.1 to B.3.3.) This question relates to Step 2 of the Garcia and Foster Audit Plan. a. Determine if the analyses of account fluctuations were appropriately performed and completed (workpapers B.3.1 and B.3.2). Review the explanations of account fluctuations provided by the auditors. Describe any problems you identify. b. Determine if the ratio analysis (workpaper B.3.3) was appropriately performed and completed. Review the explanations of ratio fluctuations provided by the auditors. Describe any problems you identify. ironment and

Question: Introduction: Garcia and Foster, CPAs, is a

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