Shant Al-Saiegh

ACCT 225
Professor Charles Andrew

Chapter 11 – 11.51, 11.52, 11.57 , 11.61

11.51

a. 1
b 2
c. 2
d 1
e 3
f 2
g 1
h 2
I 3
J 2

11.52

In November 2010, an action was brought against the company by an outside salesman
alleging breach of contract fro sales commissions and asking an accounting with respect
to claims for fees and commissions. The causes of action claim damages of $3,000,000
but the company believes it has meritorious defenses to the claims. The possible
exposure of the company to the successful judgment on behalf of the plantiff is slight.

11.57

a. The auditors should require the client to disclose the facts and their impact on the
financial statements to persons relying on the financial statements. 1) the facts are
reliable and existed at the report date. 2) the facts affect the financial statements
and auditor’s reports. 3) persons are continuing to rely on the financial statements
and auditors’ reports. If the client refuses to make appropriate disclosures,
auditors should notify each member of the board of directors that they will notify
regulatory agencies having jurisdiction over the client (SEC) as well as other
persons who currently rely on the reports.

11.61

a. Because audit documentation is the primary evidence of the audit procedures

performed and conclusions reached by auditors, the review ensures that the audit
is conducted in accordance with generally accepted auditing standards.

b. January 3 – construction of highway, January 4 – Mr. Olar’s source of the funds,

January 7 – Adjustment to raw material inventory and a credit to accounts payable
of $20,600. January 15 – 10 percent stock ownership value, January 31 – No
need for any adjustments.