Would the knowledge required to audit a consumer electronics company differ significantly from that needed in the examination of a car dealership?

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You are assigned these questions only, and and I’ll send you the readings.
Case 1:
Discussion:
#2. This case implies that no auditor with the firm of Abernethy and Chapman has an
in-depth understanding of the consumer electronics industry. Is a CPA firm allowed
to accept an engagement without having established the necessary expertise to
oversee the audit? Would the knowledge required to audit a consumer electronics
company differ significantly from that needed in the examination of a car
dealership? Does the auditor have an obligation to discuss his lack of expertise, of
his plans to obtain the expertise with the client?
#5. After the discussion at the CPA firm, Andrews was assigned to visit the
headquarters/warehouse of Lakeside to tour the facility. What should Andrews
observe, and what factors should he be especially aware of during this visit?
Case 2:
Discussion:
#1. King and Company faced a materiality question in forming its year 2011 audit opinion. How do auditors evaluate the materiality of an item in a specific engagement? Do you believe that the possible impairment of the investment in the sixth store was actually material to the lakeside company?
Exercises:
#2. if the firm of Abernethy and Chapman does accept this audit engagement, an
assessment will be made of the audit documentation produced by the predecessor
auditor. Prepare a list of the specific contents of the King and Company audit
documentation that should be evaluated by Abernethy and Chapman. Indicate each
area that should be addressed and the purpose of studying these particular areas
of the audit documentation. For example, one item that Abernethy and Chapman
should review is the adjusting entries proposed by King and Company resulting
from their audit. Abernethy and Chapman should examine these to determine the
type and materiality of the proposed adjustments. [Case2-2.doc]
Impact of SOX:
#1.
According to Case 1, the Lakeside Company is considering a public offering es
stock to finance is growth. The firm of Abernethy and Chapman does not present,
have any audit clients that are public companies, What steps would Abernethy an
Chapman has to take it before accepting a public company as a client? In particular,
how would the Sarbanes-Oxley Act impact the firm’s decision to accept such ;
company as an audit client? What additional requirements are there for a CPA firm
that is registered to practice before the SEC compared with a CPA firm that is no
registered? Is the firm of Abernethy and Chapman capable of meeting these
standards?

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