ch13 - Chapter 13 Multiple Choice 1 D 2 B 3 A 4 C 5 B 6 A 7...

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Chapter 13 Multiple Choice 1. D 2. B 3. A 4. C 5. B 6. A 7. C 8. C 9. B 10. D 11. C 12. C 13. C 14. A 15. D 16. C 17. A 18. D 19. B 20. C 21. D 22. A Discussion Questions 23. Why do public accounting firms require their salaried employees to submit time and expense reports? Would these same reasons exist in a law firm? How would this differ from the situation for salaried nursing supervisors in a hospital? [LO 1] Most public accounting firms require that their partners and employees submit time and expense reports. These reports permit firms to track time spent on each client, facilitate engagement management, and serve as input to the client billing process. Time sheet information also permits the firm to track sick leave and vacation time taken. Conceptually, a law firm is very similar to a public accounting firm in that both organizations are engaged in providing services to multiple clients at disparate billing rates across personnel type. As such, law firm employees and partners also complete time and expense reports for the same reasons stated above. This is different from a hospital environment where individual employee statistics and salary rates are not measured against or charged to individual patients. A nursing supervisor might complete a time sheet for internal resource allocation analysis but doing so for client billing purposes would be unnecessary.
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24. How do management reports produced by a public accounting firm’s engagement management system for the current year engagement assist them in bidding on the job in subsequent years? In justifying to the client human resources cost overruns in the current year? [LO 1] The firm’s management reports include statistics on hours worked by employee and the billing rates applied (gross and net of discounts) with respect to a given audit engagement. From this data, engagement management can determine the whether the often fixed audit fee has been earned at a profit or loss to the firm. Bearing in mind other circumstances, such as client records inadequately organized, significant audit risks, and additional time spent by engagement personnel on activities not directly related to the services described in the engagement letter, the management team can assess whether the audit fees are sufficient to reasonably return a profit to the firm on future engagements by the client. The same statistics analyzed for profitability and fee planning for next year can be used to understand excessive hours spent on the current year engagement for unforeseen client driven delays or extenuating circumstances which resulted in the excess hours incurred by the firm’s personnel. Under certain contractual circumstances such an understanding may justify additional auditor compensation. 25. Why would a service organization choose to hire an accountant to perform a SAS 70
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ch13 - Chapter 13 Multiple Choice 1 D 2 B 3 A 4 C 5 B 6 A 7...

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