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klio [65]
3 years ago
11

ABC Ltd (ABC) engaged the accounting firm of Ace & King to perform its annual audit. Ace amp; King performed the audit in a

competent, non-negligent manner and billed ABC for $30 000, the agreed fee. Shortly after delivery of the audited financial report, Sam Lloyd, the assistant controller, disappeared, taking with him $40 000 of ABCâ s funds. It was then discovered that Sam had been engaged in a highly sophisticated, novel defalcation scheme during the past year. He had previously embezzled $50 000 of ABCâ s funds. ABC has refused to pay the auditorâ s fee and is seeking to recover the $90 000 that was stolen by Sam. Which of the following is correct?
The auditor cannot recover the audit fee and is liable for $90 000.


The auditor is entitled to collect the audit fee and is not liable for $90 000.


ABC is entitled to recover the $40 000 defalcation of the current year and is not liable for the $30 000 fee.


ABC is entitled to rescind the audit contract and thus is not liable for the $30 000 fee, but it cannot recover damages.
Business
1 answer:
Debora [2.8K]3 years ago
8 0

Answer:

The auditor is entitled to collect the audit fee and is not liable for $90 000.

Explanation:

Ace & King did their job in a competent way, the fact that the company's controller was doing something illegal is not their responsibility. External auditors work with the information that is given to them and their job is limited to analyzing them and making their conclusions about them.

In this case, the controller was the person responsible for giving the information to the auditing company, so he had the chance to direct their conclusions. An external auditor is not responsible for what happens inside a firm, and if someone steals money or assets, he/she is responsible for it.

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On January 1, 2017, Alison, Inc., paid $60,000 for a 40 percent interest in Holister Corporation’s common stock. This investee h
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Answer:

It will be valued at:

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goodwilll 1,000

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total 75,000

Explanation:

first we calcualte the equity of the company:

200,000 - 75,000 = 125,000 equity

then we calcualtethe investment proportion:

125,000 x 0.4 = 50,000 investment

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goodwill:              4,000 (60,000 - 56,000)

2017

income: 30,000 x 0.4 = 12,000

dividneds: 10,000 x 0.4 = (4,000)

amortization on patent

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2018

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dividneds: 15,000 x 0.4 = ( 6,000 )

amortization on patent:    ( 1,000 )

50,000 + 12,000 - 4,000 - 1,000 + 20,000 - 6,000 - 1,000 = 70,000

then we add the patent and the goodwill

70,000 + 4,000 + 4,000 = 78,000

and wecheck for impairment:

as the fair value is 75,000 we decrease goodwill

6 0
2 years ago
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Which of these tax forms reports an employee's yearly Social Security tax withheld? A. W-4 B. W-3 C. W-1 D. W-2
igor_vitrenko [27]
I’m pretty sur it’s W-2
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At the beginning of the year, accounts receivable were $45,000 and the allowance for bad debts was $4,200. During the year, sale
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Answer:

Ending balance in accounts receivable = $57,400.00

Explanation:

given data

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bad debts = $4,200

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to find out

balance at the end of the year for the Allowance for Bad Debts

solution

we know here at Beginning accounts receivable balance is = $45,000.00

and  Accounts written off = $2,600.00

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Ending balance in accounts receivable = subtotal + Credit Sales - Collection from receivable    

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