Pinnacle manufactuirng part i

Identify specific considerations from Parts I and II of the case that affect your assessments of engagement risk and acceptable audit risk.

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Forced asset sales are never beneficial to the seller and would only exacerbate the already declining business trends of the Company.

Two requirements are to keep the current ratio above 2. Pinnacle engages in a number of related party transactions Part I.

Pinnacle Manufacturing?Part Ii

Therefore, the acceptable audit risk for this project will be medium. Examine customer orders for goods shipped ordered before year end. In case of noncompliance with the compulsory covenants and non-payments of interest and principal on time may cause the company unable to fulfill all current liabilities.

This could result in the loan being called unless a waiver of the loan covenant is granted. The objectives should be specific transaction-related audit objectives for acquisitions for the first matrix and cash disbursements for the second matrix. After you decide on the key controls, include each control in one of the two matrices.

As indicated in Item 7 in the planning activities, several restrictive covenants were identified. As a result, the financial data for the parent Pinnacle could be cross-referenced more easily. We will develop any capability that both our customers and we deem mutually beneficial. There should be multiple copies that will be sent to: No effect on inherent risk 5.

So the audit risk would be low since the auditors would not rely on management representation, as the figures would be high or misrepresented. Pinnacle could overstate revenues in several ways. We believe that each set of data has its strengths and weakness.

You investigate this receivable and learn the customer has not made any payments for several months. Browse hundreds of Accounting tutors. My wife and I own the company, but we hire people to manage it. With the subsidiary information, an audit of each corresponding account could result in a more accurate number for the parent company.

Pinnacle Manufacturing Employee Reviews

Familiarize yourself with the internal control system for acquisitions and cash disbursements by studying the information in Figure and Figure In Part I of the case, you performed preliminary analytical procedures for Pinnacle pp.

In order to sell Machine tech, financial statements would be extensively relied upon by potential buyers. It is also important to check that company is in compliance with all the compulsory covenants of the banks.

Receipt of Goods or Services The copy of the purchase order sent to the receiving department serves as an authorization to accept the goods when they arrive. In doing Part III, the following steps are recommended: The following are furnished as background information: Assess acceptable audit risk as high, medium, or low considering the items you identified in requirement a.

Pinnacle Manufacturing Part Part I. The Cash Ratio has declined each of the past three years indicating that the Company has a decreasing ability to pay its current liabilities from cash and will be required to liquidate assets to pay off current liabilities. Acceptable audit risk is likely to be medium to low because of the factors listed previously, especially the planned increase in financing and the potential violation of the debt covenant agreement.

Approved voucher packets matched invoice, purchase order, receiving report, and requisition prepared by the accounting department Accounts Payable are received by the Treasurer, who prepares, signs, and mails the checks and cancels all supporting documents after payment.

You are the best tutor on here. Thus, the receiving department is forced to count the goods upon arrival. Also, management is considering selling the Machine-Tech division, which has the potential to result in extensive use of the statements by the buyers.

The company is privately held, but there is a large amount of debt, therefore the financial statements will be used fairly extensively. The requisitioning department should not have the authority to actually place the purchase order. After inquiry of the internal audit team, you realize there is significant turnover in the internal audit department.

Pinnacle is an engine manufacturing company, and has recently expanded into solar engines. The following are some of the risk factors that may be identify using the fraud triangle from Parts I to III: Assess acceptable audit risk as high, medium, or low considering the items you identified in requirement a.

Apparently Pinnacle management made changes that have reduced overall operating expenses given the % decline in operating expenses in over Those changes resulted in an increase in income from operations in relative to the decrease experienced in and a slight increase in net income before taxes in 95%(96).

Pinnacle Manufacturing Part II

Part I.c – Summary of Observations Including Assessment of Business Risk Based on the financial ratios calculated, it appears that Pinnacle Manufacturing (the “Company”) is both using up cash assets and increasing its debt.

Pinnacle Manufacturing Pinnacle % Change Ratio Common-Size Income Statement Account Receivable Part G Inventory Part G Short / Current Long-term debt Part G Part A.

-Total Liabilitues have substantially increased - Could be due in part to increased inventory on hand Part B. Pinnacle Manufacturing Pinnacle % Change Ratio Common-Size Income Statement Account Receivable Part G Inventory Part G Short / Current Long-term debt Part G Part A.

-Total Liabilitues have substantially increased - Could be due in part to increased inventory on hand Part B. Pinnacle Manufacturing Pinnacle % Change Ratio Common-Size Income Statement Account Receivable Part G Inventory Part G Short / Current Long-term debt Part G Part A.

-Total Liabilitues have substantially increased - Could be due in part to increased inventory on hand Part B. PINNACLE MANUFACTURING - Part III Control Risk Matrix – Acquisitions Transaction-Related Audit Objective Internal Controls* Recorded.

Pinnacle manufactuirng part i
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Pinnacle manufacturing Part 1, Auditing