1- In class, we discussed the car dealership case of Tranum v. Broadway.

In class, we discussed the car dealership case of Tranum v. Broadway. What event occurred that finally caused the car dealership’s accounting issues and internal controls to be at the center of litigation?

a) The bookkeeper acted as the whistleblower and reported the accounting improprieties to the owner.

b) The owner of the car dealership retained a CPA to audit the financial statements of the car dealership as required by Ford Motor Co.

c) None of the other choices are correct.

d) The manager of the car dealership hired a CPA to audit the financial statements of the car dealership as required by Ford Motor Co.

e) The check written to Ford Motor Company was returned NSF (Not Sufficient Funds).

On January 15, 2017, the appropriate employee in the accounting department of X Company is doing a bank reconciliation for the bank statement for the month ended December 31, 2016. The employee sees that the bank collected $500 for X Company on a note receivable that X Company had from one of the customers that X Company had extended credit to. Also, the bank statement shows that the bank charged $50 for bank service charges. What journal entry, if any, should the employee journalize as a result of completing the bank reconciliation?

a) No employee makes a journal entry based on a bank reconciliation.

b) The journal entry is dated December 31, 2016: debit cash $450, debit bank charges expense $50, credit notes receivable $500.

c) The journal entry is dated December 31, 2016: credit cash $500, debit bank charges expense $50, debit notes receivable $450.

d) The journal entry is dated January 31, 2017: debit cash $450, debit bank charges expense $50, credit notes receivable $500.

e) The journal entry is dated January 15, 2017: debit cash $450, debit bank charges expense $50, credit notes receivable $500.

In class, in connection with involvement of more than one CPA firm where the audit of consolidated financial statements involves more than one firm, we identified 5 ways that corporations combine operations. Which of the following is not one of the 5 ways that corporations combine operations?

a) Statutory merger by acquisition of assets

b) Statutory merger by acquisition of stock

c) Variable interest entities

d) None of the other choices are correct

e) Pooling of interests

You are auditing a mining company that does business in the United States and in a foreign country. In the course of auditing expenses, you find evidence of a transaction in which a foreign official was paid to expedite the authorization of an employee's commercial driver's license in that country. The employee obtained this license sooner as a result of the payment. Under the Foreign Corrupt Practices Act, which of the following choices best describes the consequence of this transaction?

a) None of the other choices are correct.

b) If the foreign official has the discretion and judgment to decide whether the issuance of the commercial driver's license is proper, and provided the audited company has the internal controls to identify this transaction as a smoothing payment, then this is not a violation of the Foreign Corrupt Practices Act.

c) If the foreign official has the ministerial duty to issue the commercial driver's license without exercising discretion, regardless of the audited company having the internal controls to identify this transaction as a smoothing payment, then this is not a violation of the Foreign Corrupt Practices Act.

d) If the foreign official has the ministerial duty to issue the commercial driver's license without exercising discretion, and provided the audited company has the internal controls to identify this transaction as a smoothing payment, then this is not a violation of the Foreign Corrupt Practices Act.

e) This is a violation of the Foreign Corrupt Practices Act.

You are a CPA and you are considering doing an audit for a new client. Which of the following choices would definitely cause you to not accept a new audit engagement?

a) The new client reluctantly authorizes its predecessor auditors to discuss previous years’ audits with you. The new client also reluctantly authorizes its corporate attorneys to discuss the new client’s legal circumstances with you. You discover that the new client underwent an antitrust audit which revealed evidence of horizontal price fixing which occurred last year. No case has been filed, nor does corporate counsel expect a case to be filed. The practice has been stopped. The new client is not publicly traded.