Kappa Corporation operates a local landfill. Kappa is an SEC registrant, and your firm is its auditor. Overall materiality for the audit is $100,000. Shortly after the end of the year, Kappa’s CFO is meeting with your audit partner to review the preliminary results of the audit. The engagement partner presents a copy of the draft unadjusted-error summary to the CFO, which includes only one error. During the year, Kappa did not capitalize individual expenditures of less than $10,000, which is in accordance with company policy. In the past, Kappa’s capital expenditures have been relatively constant each period, and the expensing of the items has not caused any material errors. In the prior two years, the expensed items totaled $7,500 and $5,000 respectively. However, in the current year, Kappa undertook significant development of a new waste disposal plant. As a result, Kappa incurred eight capital expenditures of less than $10,000 each that were not capitalized. These purchases totaled $75,000.
Action Items
Read the case in the Overview.
By the due date indicated, complete the initial post addressing the following components:Should your partner require Kappa to record an adjustment for the expensed items in the current year?
What would happen if the facts changed, and the expensed items for the prior two years totaled $22,500 and $15,000, respectively?
How much adjustment, if any, is necessary for each of the scenarios above and to which years? <\/p>\n","protected":false},"excerpt":{"rendered":"
Kappa Corporation operates a local landfill. Kappa is an SEC registrant, and your firm is its auditor. Overall materiality for the audit is $100,000. Shortly after the end of the year, Kappa’s CFO is meeting with your audit partner to review the preliminary results of the audit. The engagement partner presents a copy of the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[16],"class_list":["post-24413","post","type-post","status-publish","format-standard","hentry","category-research-paper-writing","tag-accounting"],"_links":{"self":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/24413","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/comments?post=24413"}],"version-history":[{"count":0,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/posts\/24413\/revisions"}],"wp:attachment":[{"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/media?parent=24413"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/categories?post=24413"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/papersspot.com\/blog\/wp-json\/wp\/v2\/tags?post=24413"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}