AC 410 help A Guide to career/Snaptutorial AC 410 help A Guide to career/Snaptutorial | Page 14

You are retained by Columbia Corporation to audit its financial
statements for the fiscal year ended June 30. Your consideration of
internal control indicates a fairly satisfactory condition, although there
are not enough employees to permit an extensive separation of duties.
The company is one of the smaller units in its industry, but it has
realized net income of about $500,000 in each of the last three years.
Near the end of your fieldwork, you overhear a telephone call
received by the president of the company while you are discussing the
audit with him. The telephone conversation indicates that on May 15
of the current year the Columbia Corporation made an
accommodation endorsement of a 60-day $430,000 note issued by a
major customer, Brill Corporation, to its bank. The purpose of the
telephone call from Brill was to inform your client that the note had
been paid at the maturity date. You had not been aware of the
existence of the note before overhearing the telephone call.
Questions Requiring Analysis 15-31
Valley Corporation established a stock option plan for its officers and
key employees this year. Because the options granted have a higher
option price than the stock’s current market price, the company has
not recognized any cost for the options in the financial statements.
However, a note to the financial statements includes all required
disclosures.
a. Do you believe that Valley’s management has appropriately
accounted for the stock option plan? Explain your answer.
b. What responsibility do the auditors have for the information in the
notes to the financial statements?
c. List the audit procedures, if any, which you believe should be
applied to the stock option plan. s.
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AC 410 Unit 8 Alt