QUESTION

As an associate at a regional CPA firm, Freedom Rock Accounting (FRA), you are asked to serve as an associate auditor on your firm’s annual audit of a bulk milling and food processing firm, Pure Grain Milling (PGM). The audit will include a full report, including the annual audit opinion written to investors and an audit of the firm’s 401(k) plan. You recognize that your firm’s subsidiary, Freedom Rock Financial Services (FRFS), is the financial advisor who has sold the client, a private investor, their 401(k) plan and continues to serve as the registered representative of record to the plan.

here is the requirement. 

Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual source can be directly quoted or closely paraphrased from sources, even if cited correctly. An originality report is provided when you submit your task that can be used as a guide.

You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course.

Note: The following prompts will require the use of the attached “Financial Statements” and “Background Information” document in order to perform high-level analysis as needed to reach conclusions regarding the current-year audit of the company.

A.  Develop an audit plan (suggested length of 3−5 pages) for PGM by doing the following:

1.  Discuss two risks from the attached “Financial Statements” that represent issues that warrant additional attention during this audit, using the audit risk model.

a.  Identify one question for each risk identified in part A1 that you could ask senior management in order to obtain additional information.

b.  Identify the senior management team members, by job title, with whom you would address those risks.

c.  Identify additional auditing procedure(s) you could use to address these risks after your inquiry.

i.  Describe how these additional auditing procedures could address these risks.

2.  Identify the internal controls for the acquisition and payment cycle.

a.  Identify where these internal controls should be placed in the cycle.

3.  Identify the internal controls for the payroll and personnel cycle.

a. Identify where these internal controls should be placed in the cycle.

4.  Identify the internal controls for the inventory and warehouse cycle.

a.  Identify where these internal controls should be placed in the cycle.
 

B.  Develop a testing plan (suggested length of 2–4 pages) for PGM by doing the following:

1.  Discuss one financial statement account to be tested within the acquisition and payment cycle from part A2.

2.  Discuss one financial statement account to be tested within the payroll and personnel cycle from part A3.

3.  Discuss one financial statement account to be tested within the inventory and warehouse cycle from part A4.

4.  Identify the sampling approach for each of the three financial statement accounts from parts A2–A4 to be tested.

a.  Justify your choice of the sampling approach in the acquisition and payment cycle.

b.  Justify your choice of the sampling approach in the payroll and personnel cycle.

c.  Justify your choice of the sampling approach in the inventory and warehouse cycle.
 

C.  Describe the necessary audit evidence gathered in parts A and B to support management’s assertions.
 

D.  Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or summarized.