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p Smackey Dog Foods, Inc. started in the kitchen of Sarah,

Resolved Question:

Smackey Dog Foods, Inc. started in the kitchen of Sarah, Kim, and Jillian’s family home in the suburbs of Chicago. The three sisters initially bought the ingredients for their natural dog food recipes from the local grocery store. They used their dogs and the neighborhood dogs as their taste testers. Their dog food products were so good, the local kennels and veterinary offices were glad to distribute the sisters' products to their customers. Local demand increased significantly. Local pet stores and small grocery stores discovered the products and became distributors. The sisters moved the expanding business into a larger facility and hired a few more workers. While their competitors’ sales were flat or declining, Smackey Dog Food, Inc.’s sales were on a vertical climb! Sales were so good last year, that the sisters opened a boutique division named Best Boy Gourmet, specializing in freshly manufactured, one-serving packages meant for consumption no later than 3 days after production. They sell this product at 3 times the cost of their other products and by special order only through their new website. Demand is high, but waste has been an issue. Sarah is the president and general manager of the operation. Sarah has been very proactive in growing the business. She has met with her banker to discuss expanding the facilities and equipment with another $150,000 loan. Their first loan for $150,000 was secured by the industrial size, food production equipment purchased with the loan. The banker now demands an audit of the corporate financial statements before releasing another loan to the company. Sarah has offered to place the corporate account receivables up as collateral to secure the second loan. Based on revenue projections by her sister Jillian’s sales team, Sarah believes that the company will not have trouble paying down the loan in a short period of time. Kim manages the production operations. She oversees the inventory, production, and shipment of dog food products. The Best Boy Gourmet line has taken almost all of her attention lately. The winter holidays are approaching and sales demand based on forecasts from the sales force are higher than ever. Attaining fresh, raw ingredients is more difficult in the winter months. If any of the fresh ingredients are delayed, production comes to a standstill. There has been significant inventory waste as a result. Kim’s assistant, Henry, monitors the production and shipment of Smackey Dog Food’s regular line of product. Henry takes pride in his work and is involved in every facet of the operation. With only one other warehouse employee to help, Henry personally is involved in preparing and approving all inventory records. Henry ensures that very little finished inventory sits in the warehouse. However, the shipping dock always seems to be full of returned dog food that should be restocked. When Kim asks him about it, Henry laughs and tells her that "first in first out" applies to dog food returns as well. Kim smiles and just accepts that answer. Jillian is not very good at understanding accounting. The sisters placed Jillian in charge of sales. She manages a sales team of 12 salesmen in Illinois, Indiana, and Wisconsin. Her fear of flying and poor driving skills limit her ability to get around to the areas outside of Chicago. As a result, she has placed a lot of faith in her sales team. The sales team complained last year that they did not like waiting for their commissions until after bookkeeping calculated the actual revenues. In order to keep their spirits fired up, Jillian has her sales people project what their sales will be in the upcoming quarter and she pays commissions in advance on those projections. The sales team loves her and Jillian loves their approval. Jillian has noticed that the projections typically are off by 11% on average. The employees of Smackey Dog Food, Inc. all own dogs. It was a hiring requirement on the job application. One employee was fired when it was discovered she never owned a dog when she was hired. A lawsuit is pending by the fired employee. At this time, the receivables represent 29% of the corporate assets. The Chicago retail chain Pup Stores, Co. is Smackey Dog Food’s largest buyer. They alone represent 31% of overall sales and usually pay within 30 days. However, Pup Stores is facing a major lawsuit from an animal rights group. The legal fees are eating into their cash reserves and they are facing some store closures. The accounts receivable aging indicates that 38% of the receivables are 30 days or less. Twenty-two percent are 31-60 days. Twenty-one percent of the receivables are 61-90 days old. Ten percent are 90-120 days. The remaining receivables are older than 120 days. Sarah has not written off any of the receivables, nor will she. Sales are projected to steadily grow at 16% next year if the company does not expand its facilities. With the expan

 


If you need the rest let me know.
Submitted: 4 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 4 years ago.
Hello mullan

 

Thank you for requesting me, but for future posts, please remember to type "For BusinessTutor" at the beginning of the post.

 

Which textbook are you using please: Title, author's name, and edition? I will see if I have the book

 

Thank you

Customer: replied 4 years ago.

this is not from a textbook. but here is the rest of the information.

Smackey Dog Foods, Inc. started in the kitchen of Sarah, Kim, and Jillian's family home in the suburbs of Chicago. The three sisters initially bought the ingredients for their natural dog food recipes from the local grocery store. They used their dogs and the neighborhood dogs as their taste testers. Their dog food products were so good, the local kennels and veterinary offices were glad to distribute the sisters' products to their customers.

Local demand increased significantly. Local pet stores and small grocery stores discovered the products and became distributors. The sisters moved the expanding business into a larger facility and hired a few more workers. While their competitors' sales were flat or declining, Smackey Dog Food, Inc.'s sales were on a vertical climb!

Sales were so good last year, that the sisters opened a boutique division named Best Boy Gourmet, specializing in freshly manufactured, one-serving packages meant for consumption no later than 3 days after production. They sell this product at 3 times the cost of their other products and by special order only through their new website. Demand is high, but waste has been an issue.

Sarah is the president and general manager of the operation. Sarah has been very proactive in growing the business. She has met with her banker to discuss expanding the facilities and equipment with another $150,000 loan. Their first loan for $150,000 was secured by the industrial size, food production equipment purchased with the loan. The banker now demands an audit of the corporate financial statements before releasing another loan to the company. Sarah has offered to place the corporate account receivables up as collateral to secure the second loan. Based on revenue projections by her sister Jillian's sales team, Sarah believes that the company will not have trouble paying down the loan in a short period of time.

Kim manages the production operations. She oversees the inventory, production, and shipment of dog food products. The Best Boy Gourmet line has taken almost all of her attention lately. The winter holidays are approaching and sales demand based on forecasts from the sales force are higher than ever. Attaining fresh, raw ingredients is more difficult in the winter months. If any of the fresh ingredients are delayed, production comes to a standstill. There has been significant inventory waste as a result.

Kim's assistant, Henry, monitors the production and shipment of Smackey Dog Food's regular line of product. Henry takes pride in his work and is involved in every facet of the operation. With only one other warehouse employee to help, Henry personally is involved in preparing and approving all inventory records. Henry ensures that very little finished inventory sits in the warehouse. However, the shipping dock always seems to be full of returned dog food that should be restocked. When Kim asks him about it, Henry laughs and tells her that "first in first out" applies to dog food returns as well. Kim smiles and just accepts that answer.

Jillian is not very good at understanding accounting. The sisters placed Jillian in charge of sales. She manages a sales team of 12 salesmen in Illinois, Indiana, and Wisconsin. Her fear of flying and poor driving skills limit her ability to get around to the areas outside of Chicago. As a result, she has placed a lot of faith in her sales team. The sales team complained last year that they did not like waiting for their commissions until after bookkeeping calculated the actual revenues. In order to keep their spirits fired up, Jillian has her sales people project what their sales will be in the upcoming quarter and she pays commissions in advance on those projections. The sales team loves her and Jillian loves their approval. Jillian has noticed that the projections typically are off by 11% on average.

The employees of Smackey Dog Food, Inc. all own dogs. It was a hiring requirement on the job application. One employee was fired when it was discovered she never owned a dog when she was hired. A lawsuit is pending by the fired employee.

At this time, the receivables represent 29% of the corporate assets. The Chicago retail chain Pup Stores, Co. is Smackey Dog Food's largest buyer. They alone represent 31% of overall sales and usually pay within 30 days. However, Pup Stores is facing a major lawsuit from an animal rights group. The legal fees are eating into their cash reserves and they are facing some store closures.

The accounts receivable aging indicates that 38% of the receivables are 30 days or less. Twenty-two percent are 31-60 days. Twenty-one percent of the receivables are 61-90 days old. Ten percent are 90-120 days. The remaining receivables are older than 120 days. Sarah has not written off any of the receivables, nor will she.

Sales are projected to steadily grow at 16% next year if the company does not expand its facilities. With the expansion, sales are projected, rising 26%, with the most significant jump in the last quarter after expansion is completed and holiday sales pick up.

 

Your Role


You and your firm, Keller CPAs, have never audited a dog food manufacturer. Although it is late in the year to be accepting a new calendar year-end audit, you need the work and have the time to devote to the audit before your 2-week ski vacation in February.

You begin the audit process just prior to year-end by sending your audit manager, Pete, and two audit staffers, Ben and Maureen, out to the client. They spend time assessing the client and planning the audit.

During the first month of field work after year end, Ben and Maureen note that the dog food bags piled high on the docks are marked "Returned." One employee is seen throwing bags of the premium Best Boy Gourmet dog food into the dumpster in the morning and pulling it out and throwing it into Henry's car during the employee lunch hour.

Pete's new best friend, Alan, was married to Smackey Dog Food, Inc.'s owner, Kim, 4 years ago. Alan is also good friends with the banker from whom Sarah is seeking the loan. Pete is unaware of the relationship. Pete has talked about some of the details of the audit to Alan over a few beers.

 

 

REQUIRED: During our course, each of you will prepare one, short (5-7 pages, double-spaced) paper based on the Smackey Dog Food, Inc. case facts above. The purpose of the Project is to move you beyond the black letter into the actual practical application of legal principles in real-life situations. The project case is due at any point before the end of Week 7. It serves to highlight the importance of audit opinions and reports. This project gives you an opportunity to conduct certain audit procedures and determine the course of action regarding the audit.

Note: You are being graded on analyzing issues you identify in the project case IN ADDITION TO responding to the questions listed in the YD_Activity (see link below).

Use the YD_Activity document to answer the questions related to this scenario

 

 

Questions:

 

Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.

 

Solution:

 

Type your answer here

 

 

Q2: Discuss the essential activities involved in the initial planning of an audit. How do these all specifically to the Smackey Dog Food client?

 

Solution:

 

Type your answer here

 

 

Q3: Discuss the 4 stages of the audit and the major activities performed by the auditor in each phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc audit. For instance, examine the apparent internal control weaknesses and possible negative outcome of each.

 

Solution:

 

Type your answer here

 

 

Q4: Describe Keller CPAs' responsibilities related to communications regarding internal control matters. What internal controls issues do you identify?

 

Solution:

 

Type your answer here

 

 

Q5: You decide that you will address Smackey Dog Food, Inc.'s accounts receivables through confirmations. Discuss the various types of confirmations and what forms you will implement and why.

 

Solution:

 

Type your answer here

 

 

Q6: What are the major factors affecting sample size for confirming accounts receivable?

 

Solution:

 

Type your answer here

 

 

Q7: A major issue in verifying the ending balance in property, plant and equipment is the possibility of legal encumbrances. Discuss what specific concern do you have. Describe the procedures your firm will perform to obtain evidence about existing legal encumbrances.

 

Solution:

 

Type your answer here

 

 

Q8: The client wants to know if you will be present at the year-end inventory. What is your decision and why? What role or actions will you take at the inventory if you decide to attend the inventory. Why?

 

Solution:

 

Type your answer here

 

 

Q9: Considering the general six functions that make up the inventory and warehousing cycle for Smackey Dog Foods, Inc., identify the related documents and/or records that would be used. From your analysis of the internal controls related to the inventory and warehousing cycle of Smackey Dog Foods, Inc., what internal control weaknesses exist?

 

Solution:

 

Type your answer here

 

 

Q10: Discuss if Keller CPAs or its auditors are breaching any Professional Rules of Conduct and why or why not?

Solution:

 

Type your answer here

 

 

Q11: Discuss the CPA firm's legal liability concerns for this audit if they make a material unintentional or intentional mistake. Include any other legal liability concerns regarding possible Professional Rule violations.

 

Solution:

 

Type your answer here

 

 

Expert:  Manal Elkhoshkhany replied 4 years ago.

Thank you, XXXXX XXXXX need the name of the book please because I file my solutions using the book title, author's name, and edition that is used in the class.

 

When is your deadline?

 

Finally, I will send you a message through management (you should get it within 15 minutes

 

Thank you

Customer: replied 4 years ago.

If you could get it back to me by Oct 13 or Oct 14 is fine.

Name of the book: Auditing & Assurance Services, An Integrated Approach

13th Edition

By Arens, Elder Beasley

Expert:  Manal Elkhoshkhany replied 4 years ago.
Great :) I can post the solutions long before that, but I cannot commit until you get that message from management
Customer: replied 4 years ago.
ok how long does that takes
Expert:  Manal Elkhoshkhany replied 4 years ago.
10 to 15 minutes, but you can respond tomorrow, we have time
Customer: replied 4 years ago.
ok as soon as I get the message i will accept.
Customer: replied 4 years ago.

Bussiness Tutor

 

I am willing to pay the 35.00 but i do not know where I should go to pay the funds

Customer: replied 4 years ago.
I have added the fund please let me know if this can be done
Customer: replied 4 years ago.

Good Afternoon Business Tutor

 

I wanted to see if you still will be able to help me out. I agree to the price. Please let me know.

 

Thanks

Expert:  Manal Elkhoshkhany replied 4 years ago.

Hello mullan

 

I can help you yes, but the offer has not changed, did you mean to add the difference as a bonus?

Customer: replied 4 years ago.
I add the funds there in the amount of 35.00 dollars so i do not know how it will apply to you as a payment. I know I normally pay 15.00 but I put the 35.00 dollars on as well. So you can get pay.
Expert:  Manal Elkhoshkhany replied 4 years ago.

you have added $35 to your Just Answer Account not to the amount offered for the question. The amount you added would not be paid to me unless you edit the amount offered for the question, or once you get the answer and you click accept, you would have the option to add a bonus so you can add those $35 as a bonus. As for the part when you said " I normally pay 15.00 ..", then please note that not all questions are the same, when a question is such a long question, you need to take that into consideration when you make an offer because it takes a much longer time than normal questions.

 

Thank you for understanding

Customer: replied 4 years ago.

Business Tutor

 

I have no problem paying you the 35.00 but i do not see where i can go to edit the question and chang the amount to 35.00. If you can directly me to where I have to edit the problem then I can change it. If you pefer me to added the 35.00 as a bonus I have problem doing that. What i meant by the 15.00 is I am under a subscription plan with just answer so i think they normally charge me 15.00 but i added the 35.00 because that was your asking price. Please let me know either way.

Expert:  Manal Elkhoshkhany replied 4 years ago.
oh ok I get you now :) There is no way you can edit the amount then so the only alternative is to add the $35 as a bonus. For future posts then, when you have long problems, please advise the amount of bonus you would like to offer.
Customer: replied 4 years ago.

No problem i will make sure I do that. Thanks for understanding. Please let me know when you are ready.

Expert:  Manal Elkhoshkhany replied 4 years ago.
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