Executive Summary Smackey Dog Foods, Inc, created by sisters, Kim, Jillian and Sarah was a private start-up
company that began in a kitchen in Chicago, IL. All sisters were active participants in the business
and held key roles. Sarah was an effective president and general manger with a talent for growing
the business. Production, inventory and shipments were run by Kim. Lastly, Jillian was in charge
of sales. The business grew rapidly, distribution was no issue and demand dictated that additional
staff be hired.
After a successful year, a second division, Best Boy Gourmet was created. This division
differed in that it was a specialty one serving dog food made fresh to be consumed in no more than
three days. Being a specialty product, it had to be ordered through the website, demand was high
and the product yielded three times the profit of the original product. The drawback of the new
product was the high amount of waste.
With the continued success and growth of the business Sarah meets with the bank to obtain
financing a second loan in the amount of $150,000. The loan would be financed by account
receivables and used to expand facilities and equipment. The original loan was for $150,000 and
was secured by the company’s industrial-size production equipment that was purchased using the
funds. Worksheet for You Decide
Name ____________ Course Code _________ Grade ___/ Date__/__/__ Questions:
Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc. Solution: Type your answer here
Q2:
Discuss the essential activities involved in the initial planning of an audit. How do these all
specifically to the Smackey Dog Food client?
Solution: Type your answer here
Q3:
Discuss the 4 stages of the audit and the major activities performed by the auditor in each
phase. Give an example of how each of these specifically applies to the Smackey Dog Food, Inc
audit. For instance, examine the apparent internal control weaknesses and possible negative
outcome of each.
Solution: Type your answer here
Q4:
Describe Keller CPAs’ responsibilities related to communications regarding internal control
matters. What internal controls issues do you identify?
Solution: Type your answer here
Q5:
You decide that you will address Smackey Dog Food, Inc.’s accounts receivables through
confirmations. Discuss the various types of confirmations and what forms you will implement and
why.
Solution: Type your answer here
Q6: What are the major factors affecting sample size for confirming accounts receivable? Solution: Type your answer here
Q7:
A major issue in verifying the ending balance in property, plant and equipment is the
possibility of legal encumbrances. Discuss what specific concern do you have. Describe the
procedures your firm will perform to obtain evidence about existing legal encumbrances.
Solution: Type your answer here Q8:
The client wants to know if you will be present at the year-end inventory. What is your
decision and why? What role or actions will you take at the inventory if you decide to attend the
inventory. Why?
Solution: Type your answer here
Q9:
Considering the general six functions that make up the inventory and warehousing cycle
for Smackey Dog Foods, Inc., identify the related documents and/or records that would be used.
From your analysis of the internal controls related to the inventory and warehousing cycle of
Smackey Dog Foods, Inc., what internal control weaknesses exist?
Solution: Type your answer here
Q10: Discuss if Keller CPAs or its auditors are breaching any Professional Rules of Conduct
and why or why not?
Solution: Type your answer here
Q11: Discuss the CPA firm’s legal liability concerns for this audit if they make a material
unintentional or intentional mistake. Include any other legal liability concerns regarding
possible Professional Rule violations.
Solution: Type your answer here

• 1492745343-ACCT555 External Aud W7 Smackey Dog Food.docx

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