Accounting
Accounting 440, Spring, 2019
Class Project
Name: ____________________ Student ID __________________
Overview:
This project will be developed throughout the course of the class and will include different items from
the audit process as time permits. You will accumulate the parts listed below (additional parts will be
added as the class proceeds) and turn in a comprehensive portfolio of work on the last day of class with
this project sheet as the cover page. When the assignments require names and other specific
information use the Organization as the auditee name and Firm 440 as the auditor name. Since the class
is trying to incorporate more information than any one organization needs to consider, different pieces
will be taken from various organizations. Keep in mind that this is a fluid project and precise answers are
not necessarily the point. Demonstration of a general understanding of the audit process and
documentation of an effort to learn will be considered for the grade. The project grading criteria will be
based on the concept of a reasonable effort and appropriate documentation of that effort.
Part 1:
Using the Example Engagement letter on Blackboard (Word document) modify the letter to fit the
situation for University Enterprises Corporation of CSUSB the latest financial statements are online at
http://uec.csusb.edu/documents/UniversityEnterprisesCorpFS.pdf. Be aware there are two audit
reports because there is a single audit (see page 43). The information from both reports will need to be
captured in the engagement letter. We can discuss further in class.
Part 2:
Using the example materiality calculation sheet discussed in class, determine materiality using the
following assumptions.
User tolerance for misstatement is high. Performance materiality is 60% of overall planning materiality.
Part 3:
Using the example audit program discussed in class (available on blackboard), use the information below
to complete the highlighted steps in the program (print the program and fill it in manually). In the work
paper reference column describe what you did (or would do based on the below analysis). Sign off all
completed steps.
Deletions from CIP consist of office equipment for $53,108 and the first part of a capital improvement
project of $2,000. The remaining asset additions are for a truck purchased for $52,983. The leasehold
improvements consist of three AC units (two for $13,000 and one for $4,338). Considering materiality,
explain your test strategy for each asset addition category. The capitalization policy is to capitalize
additions over $10,000.
UEC Fixed Assets
2017 Additions Deletions 2018
Land 4,640 ‐ ‐ 4,640
CIP 63,262 ‐ 55,108 8,154
Buildings 3,936,573 ‐ ‐ 3,936,573
Equipment, Furniture 3,027,836 108,091 3,135,927
Lease Hold improvements 639,321 30,338 469,659
intangible assets 189,057 189,057
7,860,689.00 138,429 55,108 7,744,010.00
Part 4:
Perform an analytic analysis of revenues and expenditures (complete the part 4 spreadsheet available
on blackboard). Your expectation is that an account will not vary by more than the applicable materiality
(calculated in part 2 above) difference and 10%. For any variance that exceeds your expectation, prepare
an inquiry email (prepare in Word or write below) requesting an explanation for the variance from the
client.
Part 5:
Presume that there are significant challenges with valuing the split interest agreements. Management
has not attempted to adjust their value and is stating them at the historical recorded value. Since this is
not consistent with GAAP, you have determined that you cannot give an unmodified opinion on the
financial statements. Modify the report (use the Word report available on blackboard) issued to include
a modified opinion addressing the situation.