Audit Case Assignment

Plight Assignment II 
 
The Assessment of Surrender at the Crafty Trinkets Corporation 
 
Introduction   As a superior voucher in a generally-known totalitying secure, you entertain been assigned to drawing the audit of the financial declarations of a privately-held corporation designated the Crafty Trinkets Corporation (“CTC” or “the Corporation”).   
 
Corporation Background   CTC designs, manufactures, and negotiates a miscellany of dreams, which are sold primarily to bulky common venders enjoy Target and Wal-Mart.  CTC is a paltry corporation compared to competitors enjoy Mattel and Hasbro; ultimately, CTC balanceseers think their corporation’s dreams are natant the best in the universe.  Unenjoy the bulkyr dream gainrs, CTC has enjoyed consummation with a paltry portfolio of brands and products, representing three categories:  (1) kind dreams, consisting primarily of its Snuggle Pets stuffed animals; (2) stout dreams, including metal-manner and malleable manner dreams enjoy Speedster cars and Lightning renewal figures; and (3) digital dreams, consisting of video diversion kindware subordinate product.  Enjoy most dream gainrs, 60 percent of CTC’s sales fruitss are generated in October and November, with the developed span weeks of November driving half of those sales. 
 
Your secure, Smith and Corporation, LLP (“Smith” or “the Secure”), has been CTC’s generally-known totalitying secure departed 2013, providing audit and impost services to the Corporation.  The principal outer representationr of CTC’s audited financial declarations is its bank.  Assume it is now 28 November 2018.  You entertain smitten aggravate audit superior responsibilities restraint the Corporation’s 30 November 2018 year-object financial declaration audit consequently the previous audit superior has unexpectedly left your Secure to recognize a effect in another city.  (The Corporation’s year-object determination is 30 November.) 
 
Resigned criticism the succeedingcited excerpts from bearing instruments involving the drawingning and project of the general year audit.  Then criticism the academic and administrative requirements of this assignment at the object of the plight esthetics. 

Excerpts from the instrument…. “Observations Referable attributable attributableed in My Criticism of the  Previous Year (year-object 30 November 2017) Audit File” (written by you, the superior voucher…) 
 
 In fiscal 2017, CTC exceeded its earning targets, reporting gratuitous proceeds of $3,026,100 and enmesh proceeds anteriorly impostes of $2,572,800.  The solely bulky negatives restraint the year 2017 were the strong additions to amercements restraint receivables and inventories, including an extra $300,000 in the amercement restraint obscure totalitys kindred to the struggling Dream-Mart obligation in the United States.    CTC’s government advised the Secure that venders dramatically subdued the share of dreams they were desirous to fund on its shelves at any single term in fiscal 2017, and were expected to remain this trobject into 2018.  This transmute did referable attributable attributable attributable (at smallest in 2017) impoverish the book of the dreams sold through venders, referablewithstanding it has rich span-of-a-trade natant assiduity competitors restraint vend rejection interval, and extensiond gratuitous absorbs by increasing the quantity of shipments to stores.  (In the competitive environment in which CTC operates, shipping absorbs are usually remunerated by the creator, referable attributable attributable attributable the vender.)  It’s feasible that the restrictions on rejection-interval could outcome in inferior sales in future limits. 
 Ever departed 2014, CTC executives entertain shared in a douceur pool that is created through CTC donations of 10% of the principal $750,000 of gratuitous proceeds, plus 20% on the contiguous $750,000, and an added 30% of the contiguous $1,500,000.  CTC’s completion donations to the douceur pool are capped at a year-by-year acme of $675,000. 

Excerpts from the instrument…. “Findings from Visit to Client and Interim (anteriorly year-end)  Audit Procedures Conducted in September 2018” (written by the audit superior that you replaced) 
 
 In January 2018, the long-term CEO and CFO of CTC single, and replacements were hired and began effect in March 2018.  Single superior balanceseer told me that the brace are enjoy “fire-breaman dragons,” and entertain implied that their “sole calculate-single convergence achieve be increasing sales and profitability, and those who do referable attributable attributable attributable subscribe achieve be fond the occasion to remain their course elsewhere.” 
 In the tests of controls aggravate alienations, payables, and disbursements (effected during the “interim” term limit), solely single part seemed rare.  It concerned a cancelment of $30,000 to the Intercommon Dream Creator Effecters Coalition.  The cancelment was rooted by the CTC VP-Operations and liked by the general CFO, and was appropriately collocateified as a non-gratuitous charge.  According to the VP-Operations, the cancelment was “a gesture of living restraint the dream ingredienty effecters – a gesture we think is dignified departed effecters think themselves to be subordinateremunerated and are argueing the possibility of effect retrogressions and stamps in the Fliberal of 2018.  We vision this cancelment achieve co-operate-with in making it feasible restraint coalition executives to suffer their limbs to expound these issues anteriorly a effect retrogression or stamp.” 
 In the tests of controls aggravate fruitss and receivables, the staff voucher referable attributable attributableed that controls were conducive.  In apex the staff limb referable attributable attributableed that single man that was very affecting was that the CFO was free in aggravatesight of the area of unwell debts and list obsolescence. Indeed, as an model, the general CFO herself liked the reversal/recovery of the $300,000 aggregate known restraint with wholeusion to Dream-Mart, and had well-balanced rooted and liked the register initiation restraint the negotiation, reversing it into proceeds externally the involvement of the reputation balanceseer. 

Excerpts from the instrument…. “Audit Partner Memo to Effectdissertation File” 
 
 CTC had been weak to effect ample Snuggle Pets restraint the December 2017 year-object idleness opportunity, ascribable to chill esthetic shortages in an impermanent stuffing supplier negotiate.  The Corporation was able, besides, to extension product in January 2018, which known restraint extensiond sales restraint Valentine’s Day in February 2018.  Soon succeeding, at the insistence of the common venders, liberal unsold Snuggle Pets were returned to CTC restraint a liberal restore.  The venders insisted that the absence of Snuggle Pets in stores succeeding February 2018 would set-up ask-coercion restraint the Fall/Winter 2018-2019, as the venders convergenceed on the object-of-the-year idlenesss and gift-giving opportunity. 
 CTC has liberal their alienation of upstart, hi-tech manufacturing equipment ascribable to a shortage of money and the poverty to achieve friendly financing.  This is the assist year in a grade that CTC has liberal this siege. 
 CTC executives entered into an contract with Cartoon Studios, Inc., who had effectd their very principal excited movie, designated “The Bronx Zoo – Escape to Manhattan!” restraint liberate on 30 November 2018.  (The movie is billed as “Jumanji” meets “Babe: Pig in the City”!)  Restraint $900,000, CTC had acquired the hues to effect a verse of kind and malleable dreams established on characters from the movie.  (CTC drawings to amortize this fee aggravate 9 years.)  The dreams would be sold through CTC’s systematic vend customers.  The dreams were on schedule to be in stores on 30 November.  The contract among the Corporation and Cartoon Studios implied that Cartoon Studios would liquidate CTC restraint the absorb of the unsold dreams if sales of the dreams failed to attain $1,500,000 during the principal span months succeeding the movie’s liberate.  CTC drawings to amplify $1,500,000 of sales fruits on 30 November touching to this anticipation of the contract.   
 CTC executives entertain scrupulously criticismed the pricing and valuation of list during existing November 2018, and established that the list valuation limitation periodical in the previous year is no longer necessary; a register initiation was made by the CFO on 15 November 2018 to counterposition the valuation amercement into gratuitous proceeds. 
 In October 2018, CTC announced that it was suspending it’s joint-interest with the cegiving structure “Toys restraint Kids,” an structure that distributes dreams to subordinateprivileged conclusion in less-developed countries environing the universe.  In the departed, CTC had donated a strong calculate of dreams to “Toys restraint Kids.” 
 On November 1, 2018, the Corporation’s Board of Directors Compensation Committee agreed to envelop the Corporation’s donation to the douceur pool, to $1,350,000.  This estimate achieve be conducive restraint the year-ending 30 November 2018.
 

Requirements:  Using your passagebook and esthetic argueed in collocate as wholeusion esthetic, resigned oration the succeedingcited issues: 
 
 Fulfill at smallest single surrender ingredient kindred to voucher trade surrender, and single kindred to client trade surrender. 
 Fulfill and paltryly argue controlcible surrender ingredients restraint esthetic misdeclaration (in other opinion, IR and CR) give at CTC.  If any of these surrender ingredients besides extension the surrender of wrong, fulfill them as such. 
 Succeeding fulfilling controlcible surrender ingredients, redonation your sentence to assess the surrender of esthetic misdeclaration at the Corporation.  You may assess RMM on a flake of 1 to 10, or using categories such as subsided, moderation, haughty, and very haughty. 
 Then, fulfill single totality in the financial declarations of CTC that appears apexly surrendery, and then single government assumption touching to that totality that appears to subscribe controlciblely to the surrender of esthetic misrepresentation.  In prescribe to do this, you may deficiency to assess the soundness of the totalitying or projected totalitying restraint some of the issues cited aloft.  If you don’t recliberal the apexs of how to totality restraint convinced issues, you may deficiency to agree in a paltry piece of totalitying criticism/research to assess whether the totalitying or projected totalitying is in specimen with GAAP.  Succeeding you fulfill a surrendery totality and a kindred surrendery assumption, argue how you would advent the audit of that assumption.  You may deficiency to contemplate in sections of the passage that we did referable attributable attributable attributable caggravate in collocate, depending on your gathering of totality and assumption. 

 Resigned embrace a disjoined caggravate page that embraces your cwhole and learner calculate.  Resigned do referable attributable attributable attributable deposit your dissertation in a folder or support.  A stapled dissertation achieve be superior. 
 The substance of the dissertation should be written in truth restraintm (referable attributable bullet apex restraintm, although you can gain scant redonation of bullet apexs) and should be exuberant in diffusiveness to oration the requirements, referablewithstanding in no plight longer than 5 pages in diffusiveness.  Resigned redonation a single-spaced, arrest paragraph restraintmat (left and fit advocacy), with single interval among paragraphs or headings (congruous to the giveation of the principal page of the plight aloft).  Redonation a 12 apex font and plummet margins. 
 Be scrupulous that you subordinatestand the termverse of the well-balancedts in this plight.  Recognize that some of the notice relates to the previous year audit, and some relates to the general year audit future up.   
 Resigned do NOT spobject controlcible portions of your write-up recounting the postulates of the plight, or giveing a analysis of the plight.  Assume I entertain decipher the plight notice, am well-acquainted with CTC, and most dignifiedly, I am well-acquainted with auditing terminology, system, and exercise.  You deficiency NOT desuperior auditing terminology in your plight write-up.  Doing so is useless, fond your auditory, and achieve depreciate from the capacity of your dissertation. 
 Your dissertation should be plain and professionally giveed.  I achieve evaluate twain the resigned and the diction of the instrument.  Resigned achieve totality restraint closely 75% of the apexs touching to the dissertation, and diction (grammar, punctuation, awe.) achieve totality restraint closely 25% of the apexs.  Pervasively insufficient congruity may caredonation you to induce liberal the apexs touching to diction, so resigned endow the trial required to reform your dissertation anteriorly meekness.  PROOFREAD your dissertation and establish typos, misspellings, and expression errors. 
 
 

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