Acct 555 Smackey
This paper analyzes a fictional privately held company, Smackey Dog Foods, Inc. as well as its fictional auditor, Keller CPAs. The analysis is based on a Keller Graduate School of Management scenario and a series of questions developed to address concepts learned throughout the External Auditing course. Concepts include: SEC influence, audit planning, audit stages, internal controls, confirmations, sample size, obtaining evidence, inventory, warehousing cycles, Professional Rules of Conduct, and auditor’s legal liability. Each of these auditing concepts are explained and then applied to the scenario between Smackey Dog Foods, Inc. and Keller CPAs.
Questions and Answers
Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.
The Securities and Exchange Commission (SEC) has control over rules regarding “companies publicly offering securities for investment dollars” (U.S. Securities and Exchange Commission, 2012). Although the SEC is not in control over the rules regarding privately held companies, their influence over auditing exists regardless of control being public or private. This is because the SEC’s opinion is considered by the Financial Accounting Standards Board (FASB) which established the generally accepted accounting principles (GAAP) (Arens, 31).
These principles are what should be followed by Smackey Dog Foods, Inc. (Smackey) when recording their business transactions and completing their financial statements. Keller CPAs (Keller) will be auditing Smackey to ensure compliance with the GAAP. So although the SEC does not have authority over Smackey since it is a private company, the indirect relationship exists through the influence that the SEC has over the GAAP.
An additional position can be taken on the SEC and its influence over the audit through the auditors. Since the SEC has many certified public accountant (CPA) firms that represent clients that are publicly held, the SEC is involved in creating
References: Arens, Alvin, Randal J Elder, Mark S. Beasley. (2010) Auditing and Assurances Services, 13th Edition. Pearson Learning Solutions. <vbk:9781256083337#outline(6.7)>. U.S. Securities and Exchange Commission (2012, June 6). What We Do. Retrieved from http://www.sec.gov/about/whatwedo.shtml