Smackey Dog Foods, Inc

You Decide Project - Smackey Dog Foods, Inc.

Smackey Dog Foods, Inc. manufactures two product lines of dog food, sells their product to retail store distributors and is growing faster than their competition. They have decided to expand their facilities and purchase more equipment in order to keep up with the demand, but found themselves in need of a capital loan in order to accomplish this objective. The bank is requiring that Smackey Dog Foods, Inc. provide audited financial statements before they are willing to consider the loan. Smackey Dog Foods, Inc. presented Keller CPA's with the opportunity to take them on as a client to complete their audit, and Keller CPA's has accepted the proposal. This paper will discuss the four phases of the Smackey Dog Foods, Inc. audit and the challenges that Keller CPA's will be faced with during the audit cycle. The following audit phases will be discussed in more detail: planning and designing an audit approach, performing tests of controls and substantive tests of transactions, performing analytical procedures and tests of details of balances and completing the audit and issuing an audit report.

During the planning and design phase, Keller CPA's must consider the cost of accumulating evidence for the audit, ensure that sufficient appropriate evidence is accumulated to meet their professional responsibility, and identify why Smackey Dog Foods, Inc. needs the audit. Keller CPA's decision to accept this client needs to be made by a senior person on the audit team who is responsible for making the important decisions and should be decided upon early in the engagement, before incurring costs that may not be recoverable. Keller CPA's has never audited a dog food manufacturer, so by accepting the job they must ensure there is not a breach of the professional rules of conduct by doing their homework on this type of industry in order to prepare a fair audit report. Keller CPA's should obtain an understanding of Smackey Dog Food Inc's company environment, including their strategies, processes and business model. In addition, an understanding with Smackey Dog Foods, Inc. regarding the terms of the engagement needs to be made to avoid any misunderstandings during the audit.