On September 3,20X1,Larkin,CPA,was Engaged to Audit the Financial Statements of Precious

question 64

Essay

On September 3,20X1,Larkin,CPA,was engaged to audit the financial statements of Precious Metals Co.(PM),for the year ended October 31,20X1.PM purchases precious metals at wholesale prices and resells them to craft clubs at retail.PM is a new client whose common stock was first offered to the public five years ago.PM received an unqualified opinion on its financial statements in each of the prior three years,but changes auditors after each engagement.In accepting the engagement,Larkin completed all of the appropriate client acceptance procedures.
Larkin instructed Johnson,an assistant on the engagement,to draft a planning checklist that would assist Larkin in preparing the audit staff for the fieldwork that is scheduled to begin on October 17,20X1.On October 5,20X1,Johnson prepared the planning checklist below (engagement letter points have been omitted).Indicate the inappropriate points that are included on Johnson's planning checklist.

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Definitions:

Probability

A measurement of the likelihood or chance that a certain event will occur, expressed as a number between 0 and 1 (where 1 indicates certainty).

Utility

A measure of satisfaction or happiness that a consumer receives from consuming goods and services.

Expected Utility Function

A concept in economics and decision theory that represents an individual's preference for a set of possible outcomes based on a probability distribution.

Sure Payment

A fixed amount of money that is guaranteed to be paid under specified conditions.