Last Year the Review of Lethbridge Broadcasting Did Not Go

question 40

Essay

Last year the review of Lethbridge Broadcasting did not go well for Bossy & Bossier CPAs. In an attempt to meet budget, Mike Bossy, the auditor-in-charge, left out the review of closing procedures. His Group Partner's review notes were professional but his annual review commentary was not as complimentary. Mike was not convinced that he was at fault and felt that according to his firm's mandate, as spelled out in the engagement letter, it was the client's responsibility to ensure the adequacy of closing procedures.
This year the firm will be starting the audit of a new broadcasting client and the partner is planning the risk assessment procedures. His partner's review note reads: "Ensure that Mike Bossy gains a detailed knowledge of the Quebecor Media broadcasting operations at the entity level."
Required:
a) Comment on the partner's Lethbridge Broadcasting concerns and explain how the closing process is supposed to work.
b) Discuss the entity-level audit procedures Mike will have to follow in order to gain an understanding of Quebecor Media operations and why the entity-level procedures you identify are important.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of a product, and is used for external reporting purposes.

Unit Product Cost

The total cost associated with manufacturing one unit of a product, including labor, materials, and overhead expenses.

Year 1

A term typically used to refer to the first year of operation, accounting period, or investment.

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, including rent, salaries, and equipment depreciation.