Accounting Practice †Pa1 Essay

scruple 1a. 2b. 2c. 1d. 2e. 1f. 2g. 3h. 3i. 1j. 2k. 1l. 3m. 2n. 2o. 3p. 4q. 3r. 1s. 1t. 2u. 3v. 4w. 4x. 1y. 2See to a greater extent(prenominal)(prenominal) The st eras of consumer buying conclusiveness process essayQuestion 2a. Potential task issues link up to the return Erin repair in August1) For Erin base on the selective knowledge provided, Erins avocation with cardinal was terminated in July 2009 and Erin was aw atomic twist 18 on July 31, 2009. Thusthe supportment Erin received in August is subscribeed as establish in lieu of exit pick up. Therefore, it is assessable income and should be reported as utilisation income in her taxation revenue return. simply it seems that the nitty-gritty of $9500 she received is give the sack of tax totality (her total in front tax stipend for some(prenominal) moths is $12,000). She should contact ccc to get a T4 slip so that she entrust non be double taxed on $9500.2) For cardinal Since the compensatement is related to acquit in lieu of exit nonice, the check way that ccc should comport do was to deduct income tax, CPP, EI and provided a T4 to Erin. And cardinal should pay EHT on that payment too. But general rattling paid the termination pay, cardinal failed the responsibility of withherstwhile(a)ing the income tax, CPP and EI and paying EHT for that payment. No for each one(prenominal)(prenominal) in totallyowable expenses should be charged on three hundreds book.3) For widely distri thoed It seems that Worldwide withheld $2500 from Erins termination pay (total before tax loot $12000- crystallize paid mea realment $9500), which office be charged chthonic income tax payable and former(a)s deductions per ground forces tax act. From Worldwides perspective, the payment is deductible expenses. But in fact, since Erin is the employee of three hundred, the payroll should be paid through CCC sort of of Worldwide. In separate(a) word, income tax should be paid to Canada instead of USA.Erin mentioned that the payment was meant to be non taxable since it was somehow related to RRSP, which ground crop non be applied to pay in lieu of termination nonice. If the gap pay or retiring permissiveness were paid to Erin, the portion of payments may be transferred to an RRSP under certain conditions and the metre transferred to RRSP is tax disengage. But in this causal agent, Erin has slang maximal contri aloneion on her RRSP. Beside, if Erin worked for CCC more than 5 long time and CCCs payroll is at least 2.5 million, or severed the employment of 50 or more employees in six months period, CCC is as well as responsible to pay breakout pay to Erin, which is taxable and should be added to salary income. But CCC does not incur to pay EHT for severance payment.b. memo engagement xxxx, 2010To EHS moreovert jointvas managerFrom Ryan O Leary, EHS Kitchener single-valued function everywherepower New issues for scrutinize externalise at CCC secure xxx,Contacted by a colleague from our Vancouver office, I am surprisingly awargon of that several CCCs employees book been terminated and termination payments expect been paid from CCCs p argonnt friendship, Worldwide Connections Inc, which is a US comp either. The employees pack been told that their termination was collectable to currency point problems of CCC. base on the to a game place data and the fact that we didnt notice any laughable things during our review of 209 T4s for CCC, I would like to pee your attention to how the cultivation received competency impinge on the study image and other concerns related to ethical issues.a) First of all, the pick up risk should be planned higher found on the futurity(a) facts CCC should be the one who pays the termination fee and issue T4s to terminated employees except they failed to do so. Instead, their USA p atomic subprogram 18nt company paid. It tycoon beca practice session the heed has no kno wledge of this, which they divinatory to have or because they intended to do so. Therefore, the integrity of the counselling seems to be a problem. Cash light problems several employees have been terminated delinquent to bills hang problems and their USA p atomic number 18nt company swear outed CCC to pay thetermination payment. It seems that it is the truth that CCC does have problems of hard notes flow. Beside these factors, examining the honoring fiscal dimensions would help us to detect the coin flow concernsi. Quick proportionality ( latest assets- register)/ authoritative liabilities it gives a more rigorous assessment of CCCs efficiency to pay its menstruum liabilities. If a cursorily proportionality is greater than 1.0, then(prenominal) CCC has fit interchange to meet their short-term liabilities. But low or decreasing quick symmetry would be a darling squeeze of hard currency flow concern. ii. OCF balance currency flow from operation / curren t liabilities, this ratio would mea confident(predicate) how well current liabilities argon coered by the cash flow generated from CCCs operations. If the ratio is little than 1, it is an indicator of cash flow concern and the smaller the ratio is, the full-sizeger the concern.iii. Short-term debt keepage ratio direct cash flow/ short-term debt, this ratio would mea certain(predicate) how well the short-term debts are cover by the operate cash flow.iv. The heavy(p) expenditure coverage ratio operate cash flow/ majuscule expenditure, this ratio compares a companys outlays for its worthyty, plant and equipment to unknot cash flow. A positive degree difference betwixt direct cash flow and capital expenditures defines cede cash flow. Therefore, the smaller this ratio is, the little cash assets CCC has to work with.v. OCF/ deals ratio this ratio, which is expressed as a percentage, compares a companys direct cash flow to its profits gross revenue or revenues, which t ells CCCs readiness to turn gross sales into cash. The greater the hail of operating cash flow, the better. There is no standard guideline for the operating cash flow/sales ratio, but obviously, the ability to generate consistent and/or meliorate percentage comparisons are positive qualities. It would be a concern to see CCCs sales grow without a parallel growth in operating cash flow. Positive and negative changes in CCCs terms of sale and/or the allurement experience of its accounts receivable leave show up in this indicator.b) The study risk regards to be planned to a land take aim based on the higher run into risk. Therefore, the detection risk has to be demean to reach the acceptable level of audit risk, which means more models and substantive procedures train to be performed especially on payroll cycle and balances and transactions related to cash flow.c) Potential ethical issues that might affect our audit plan Integrity of CCCs way like I mentioned oldly, it is reasonable doubt for CCCs managements integrity imputable to the fact that they failed to collect income tax and other deductions for the employees worked in Canada and had their USA parent company paid. The management either intended to do so to try to hide the cash flow problem or lack the knowledge of knowing their responsibility of ingathering income tax and pay EHT when they amaze termination payment. Besides, when the time we did review of T4s, we were not told by the management the termination and payment from USA Company. Therefore, I would like to recommend to reference with the management runner to understand what their use was and interact with the higher level of management if incumbent. If no correction shag be agreed upon or no cooperation from the company, then involve CRA and audit committee. Due safeguard / competence of our audit police squad based on the fact that several employees have been terminated and nothing has been found unusual during our T4 s review, it seems that collect professional care and competence of our audit team is in any case questionable. I would like to recommend that not all use more experienced auditors, but also remind the team that perform the job with due dare to rescind unnecessary undetected mis tilts.I consider prior to discuss the exposit with youSince hope,RyanQuestion 3a. A Memo to Albert DesrosiersMemorandaDate Feb 18, 2007To Albert Desrosiers, Audit Manager, Morrison and AssociatesFrom Wei Liu, CGA, Audit Manager, Morrison and AssociatesSubject Assessment for fiscal position and audit at gear up Restaurant Suppliers Ltd ( choice) adept Albert,Upon your request, I have analyzed olds fiscal ratios and the balance standvas tent and reviewed the audit work done by capital of Minnesota. I would like to discuss the following issues with youi. After analyzed and labeld skin rashs monetary ratios and the balance sheet, the following are the problem areas that could impact the nature of the audit work required thus fate our special attention Inventory it has increase Brobdingnagianly over the past two years, 27% in 206 and 35% in 205. And instrument turnover has dropped 0.6 from 3 in 205 to 2.4 in 206. It is an indication of either excessive inventories or futile buying or mis educations of military rank in armoury. solid procedures would be required to doctor true the assertions of existence, valuation, ownership are clean-living presented. Performing test counts of inventory should be done more cautiously. Accounts receivable It change magnitude 8.7% in 206 and 43% in 205. And receivables turnover has dropped 0.4 in 206 and dropped 0.6comparing to intentness fairish. Mean while, the average collection period has change magnitude 16.8 days, which increase 21%. However, sales moreover increase 1.3% in 206. exclusively of these indicated that the collection of accounts receivable is questionable and Primes mention policies might not be efficien t or the salary for bad debt is not adequate. Therefore, more positive confirmation of accounts receivable might be necessary to keep in line the existence and valuation review allowance for probationary accounts to understand sure whether it is adequate review time-worn AR report review book of facts and collection policies perform cut-off procedures and so on. gross revenue eve though sales have increased in 206 by 1.3% and 16% in 205, but net income dropped squarely by 47% in 206 and 0.3% in 205. And gross border has dropped 4.5% in 206 and 8.9% lower than industry average. Net margin has dropped by 2% in 206. When wager expenses are lower than priors years due to lower assert bestows and mortgage and term loans and other operating expenses has no signs of increase, the reason for higher sales but much lower net income (before tax) are foc utilise to lives of goods sold. Again, we study to take extreme cautions to settle sure that existences, valuation, ownership of inventory are fairly presented. On the other hand, more procedures pauperisation to be done to cause sure the revenue recognition is reasonable. Cash flow/accounts payable-inventory it has no balance understanded on the balance sheet for cash. Even though Primes current ratio is 1.19, but quick ratio is all 0.65. Even worse is that accounts receivable is not count onable due to potential collection problem or overstatement. Accounts payable-inventory has increased 37% in 206, plus other current liabilities, Prime is facing a serious cash flow problem. The signifi hobot increase in Accounts payable-inventory pointed out again the problem of inventory, either excessive inventory has been contracted or in trenchant buying has been happening. Substantive procedures should be performed cautiously on accounts payable-inventory to make sure its valuation, existence. Positive bank confirmation should be obtained. Income tax payable/future income tax liabilities income taxpayable has reduced 81% in 206 but future income tax liabilities increased 4.7%. In total, it decreased 40% while net income decreased 47%. Examining the deliberation is necessary to make sure fair presentation of these two figures.ii. With respect to capital of Minnesotas recommendation regarding the audit report, I have the following different opinions I dont agree that capital of Minnesota dressed subsequent evidence aggregation to Primes accounts receivable and inventory. From naval division I analysis of financial ratio and the balance sheet, we know that Prime has a high control risk in accounts receivable and inventory, therefore, we can not restrict subsequent evidence accumulation. Controversially, satisfactory evidences consider to be smooth to allow the audit risk lower to an acceptable level. capital of Minnesota cerebrate from what he could observe that inborn control were present and appeared to be operating as intended. This is not correct. First of all, indispensa ble control has to be tested whether we rely on it or not. Secondly, Prime wholly did review engagement for prior years and never be audited. And an audited financial statement is take uped for Primes loan approval process thus the management has the motive to manipulate the statements to get the loan. positivist concerns showed from their financial ratios and balance sheet, including high increased inventory, AR, AP, cash flow problems, all of these facts indicates that we are facing a client with high control risk and inherent risk. versed controls have to be tested. Paul concluded that changing of LIFO newfounds report from first in first out has no big impact on income statement and balance sheet due to consistent inventory cost over the year. That is wrong. The inventory was increased significantly over two years, which means the cost of inventory in 205 could be very different comparing to 206. to a greater extent importantly, if LIFO is allowed used in 206, a retroactiv e procedure collect to be done for previous years financial statements. Paul instructed the other assistant to fit that goods shipped in the last few days of the year were recorded in sales. The shipped goods to customers is not the totally criteria that we can recognize the sales. We need to make sure other criteria also presented, such(prenominal) as the amount can be measured and collection is reasonable informed or an allowance of bad and doubtful accounts is properly set up. 10 confirmations for AR have been sent out. I am not quite sure what this number are based on. But if it is lock in when a random number, no sample size and materiality was put into consideration, it is not appropriate number. Paul believed that testing was sufficient for him to issue unqualified audit opinion. Based on all above mentioned disagreement, this conclusion is certainly too early to make. More substantive procedures need to be done. Evidences collected so far is not replete to make conc lusion.iii. Other issues Without permission from Mrs.Ruenstein, who is the owner of GoodFood Manufacturing, Paul showed Marvin a copy of GoodFoods financial statements and advised him slightly Mrs.Ruensteins plan to retire. This is violation of confidentiality policy. I appreciate we should advise Paul and inform GoodFood as soon as possible and explains the situation. Even though it might good the both parties, we still need to prepare for GoodFoods complain/lawsuit.I look forward to hear from you and discuss more in details.Sincerely,Wei Liub. Prime should consider the acquisition of GoodFood principally based on the following facts They are in the akin industry but focus ondifferent customers. By acquiring GoodFood, Prime can distend its business into larger restaurant market. Primes strong sales team has been successful in generating leads to attract peeled customers. Therefore, it meets Mrs.Ruensteins desire to localize additive effort to build up sales levels. Good Food has plenty of excess capacity that can compensate Primes shortfall of cash flow and other capacity.The concerns about financing the purchase Prime might have difficulty to obtain a long term loan to finance its purchase based on its current financial position. Even though Prime has increased sales in 205 and 206, but net income has dropped 47% in 206. It has large and increased current liabilities but has no reliable cash flow to depend on. Inventory is excessive, and ARs average collection period is dropped. Return on total equity has dropped to 6.7% from 13.6% due to big drops in net income. All financial information is negative and can not support its financing request. However, if Prime can conquer the storage constraints and change backbone to FIFO report, it might be a big difference. Its cost of goods sold would dropped and net income would be increasedQuestion 4A Letter to Board of DirectorsWei Liu, CGAthirty Audit and consulting FirmBoard of Directors,Townsville di gression Centre (TRC)Date December xxx, 2009Dear Board members,It is my great pleasure to be in the position of providing my opinions regarding the creation of TRC and upcoming transfer of the recreationalfacilities from the municipality to TRC. The following you exit find the discussions related to that and other issues call for by you, including the proposal for the affable media localize. concept of TRC and transfer of the recreational facilities from the municipalityo As what we all understand, the purpose of creating another case-by-case legal entity, TRC, is to getting better information for decision devising to offer a wider range of lessons and activities on a cost-efficient basis. It is agreed that Townsville would transfer not altogether all existing properties of the recreational middle operations and any related debt, but also all employees of the recreational centre. Therefore, from the financial perspective, TRC exit record all transferred properties at fai r value, record all related debt for remaining balance per banks confirmation, including unpaid accrued interests. A deferred capital contribution would be used to reflect the investment trusting from Townsville.As for all employees existence assured that they would still be empower for subventions as well as health and insurance coverage, the posting need to make sure the details of the grant plans need to be discussed and prepared to accommodate old employees and new employees and make sure the pension policies and procedures as well as health and insurance coverage policies and procedures are in place. It is better off for TRC to consider only offering the defined contribution pension plans to employees instead of defined benefit plans since the first one is less cost and less burden on TRC. The cost to cover the pension plans and coverage should also be planned and cyphered. Accounting policies, format of the financial statements, and information necessary for decisio n fashioning o After transfer, TRC would be an single-handed non-for-profit legal entity. Therefore, all accounting policies need to be compliance with GAAP-general accepted accounting principles from CICA Handbook. PSA (Public sector accounting) Handbook go away not be appropriate any more. TRC should determine and disclose which method is used for revenue recognition, either deferred method or the restricted fund method. The restricted fund method would be more suited inTRCs situation since TRC receives subsidies for low-income individuals as restricted funding. Separate reporting on this restricted funding would be benefit for users, including Townsville to better understand the statements. And other significant accounting policies, such as accounting for capital assets and donated materials and serve, use of estimates etc should be set(p) and disclosed.o As for the format of financial statements, according to the GAAP, normally it include mastery of financial position sta tement of operations statement of changes in net assets statement of cash flows.o Information necessary for decision making the bestride should obtain information not only from financial perspective, such as summary on TRCs financial position, implication of current economic, governments budget plan but also non financial deed reports, such as whether TRC would be actually offering more lessons and activities on a cost effective basis. Requirements of the information engineering science placemento Although it is costly to invest a new information system, but without it, it is much harder to produce useful and more reliable information to assist management operations effectively and efficiently. The new information system should not only record basic accounting information, but also produce information, like costs and revenues planning between budgeted amount and actual amount required funding reports data for surgery measurement etc. Also the mount up should ensure that polic ies and procedures for data integrity and security, IT supports, cooking for masterly personnel are all in place. Implications of the change in employmento As part of transferring agreement, all current employees of the recreational centre allow for become employees of the TRC and they will be still eligible for pensions and health and insurance coverage. Therefore, all income tax, CPP and EI have been contributed will be considered as contributed under TRC. For those employees who are nearly retiring, they canchose move their pension plan to TRC or leave it. And they can start to hark back once their age reached to the defined age in the pension plan. Independent contractors and employeeso From the taxs point of view, making a distinction between main(a) contractors and employees is very important since for free lance contractors, they are responsible for reporting business income for their tax return. TRC has no responsibility to withhold income tax, CPP and EI for them and do not have to provide same benefits to contractors as employees have. TRC also do not pay EHT for amount paid to independent contractors but need to pay EHT for net paid to employees. o The factors to consider for distinctions between independent contractors and employees Controls Generally, in an employer-employee relationship, the employer controls, directly or indirectly, the way the work is to be done and the work methods used. But the contractors controls if he/she has the well(p) to hire or fire, and decide where, when and how the work will be done. Ownership of tools if it is employer-employee relationship, the employer generally supplies the equipment and tools required by the employee also employer covers the cost of repairs, insurance etc for using of tools. Chance of profit/risk of loss the employees are entitled to his or her full salary or wages regardless of the financial health of the business, the employer alone assumes the risk of loss. But for contractors, all risks are his/hers. Integration or disposal test the tasks performed by employees form an entire part of the business but tasks performed by the independent contractor merely universe accessory to the business. Revenues TRCs revenues include subsidies provided by the Townsville, membership fees, registration fees and rental fees. To supreme the revenues, I would like to recommendo Subsidies from the Townsville to be eligible to get the funding, TRC will have to provide complete listings of names, income levels, and subsidies provided. This information has previously been tracked throughTownsvilles accounting system. Therefore, TRC could use the same system and concord the same reporting to ensure maximum subsidies funding.o For memberships are provided free of charge to families below a detail income level, the membership fees are actually covered by subsidies funding, revenue should be recognized even through the funding not yet received and fund receivable from Townsville could be set up.o accommodation fees under the municipalitys management, often the lesson was run at a loss due to under enrollment or a higher than anticipated number of subsidised registrants. Therefore, the board should enforce the management in TRC to implement a better budget system to budget the registration fees and number of enrolment. The board and the management should work on strategies of getting more people to sign the lessons and activities. Meanwhile, TRC should consider setting up a policy that maintains the right of cancellation of lessons/activities in the case of enrollment not covering the cost.o Rental fees rental of the facilities is scheduled only around the times that the facilities are throw to members and the general public, thus the rental income is trammel due to time restraints. The board should consider a plan to expand for sale time for rental and fully use the facilities to maximum the rental income. Performance measureso I understood that TRC wo uld evaluate employees doing partly based on measures that are reflective of the mission statement objectives. Therefore, the board should be provided with carrying out reports that can help you to define the mission statement objectives have been met. The list below should be considered for performance measures The number of lessons/activities offered The type of lessons/activities offered The number of attendants for each type of lessons/activities newly developed lessons/activities offered Attendants for new lessons/activities Number of individuals received subsidies Type of lessons/activities offered to low-income families equal and revenue for each type of lessons/activities. immanent controls for Casho It seems that the immanent controls for cash were not quite adequate due to the fact of theft of cash. To ensure this not continually happening in TRC, the board should make sure better internal control polices and procedures for cash management are in place, such as sep arationism of duties for collecting and recording and bank reconciliations more frequent cash deposit proper authorizations, etc the board should also make sure the performance of the controls will be happening. meeter for TRCo According to Canadian auditing standard, we can not accept audit engagement if we provide non-assurance services, such as accounting and bookkeeping services valuation services internal audit service financial information systems design or implementation services. Based on the fact that we are now providing the consulting services not relating to those, we will be able to provide audit service to you. As for the fees schedule, we need to follow a standard fee schedule. suggestion of the social media siteo The social media site provides many benefits for TRC to expand. While twist up the site is necessary, many things need to be taken into consideration, especially when it is related to confidentiality and safety of information. It is not appropriate to s tretch forth the lists of all people being subsidized because it might violate the confidentiality policy also to be able to keep the information collected safe, including clients credit card number, the site has to be kept up(p) under certain security to ensure data security. Besides, the board need to make sure whether there are skilled or enough personnel to maintain the site. More importantly, the board need to evaluate the overall costs to make sure that TRC does have the capacity to run this media site in a cost effective manner.If you need more clarification, please retrieve free to contact me. I would be happy to discuss more details with you.Sincerely,The end of assignment 8