12 min

Cable Co, Incwrapping up the audit

part five

score sheet keeping track of proposed audit adjustments

assets liabilities income

payroll 64,000 <64,000>search for unrecorded liab 133,000 <133,000>providers of premium services 876,000 <876,000>

total 0 1,073,000 <1,073,000>

score sheet keeping track of proposed audit adjustments

assets liabilities income

payroll 64,000 <64,000>search for unrecorded liab 133,000 <133,000>providers of premium services 876,000 <876,000>

total 0 1,073,000 <1,073,000>

plus allowance forundetected errors

aggregate likely misstatement

footnote disclosure

about the pending acquisition of Kelso Communications

related parties

related party transactions must be disclosed in the footnotes

(page 360)

one of the parties may be in a position to significantly influence the other party to the extent that “arm’s length”bargaining is not possible

related parties may structure a transaction to obscure problems that would otherwise manifest themselves in the financial statements

page 360

one party may be in a position to significantly influence the other participant

could Doyle structure transactions that

increase Bro in Law’s bonus over at Stark & Assoc ?

is this an “arm’s length” transaction ?

is Arnie in the same position to negotiate the best terms and conditions with Stark & Assoc as he might be with Miller Engineering ?

Gail

I think you have the best relationship with Doyle

footnote disclosure

Stark & Assoc. is owned by Doyle Matthews, President of CableCo., and his brother-in-law. In 2007, CableCo. paid Stark & Assoc. $500,000 for engineering services and owes Stark & Assoc. $85,000 as of Dec. 31, 2007.

management letter recommendationspage 415

• integrate purchasing to take advantage of bulk purchase discounts

• centralize cash management

• assess investments to maximize interest

• update their policies and procedures manual