Audit review – Jim’s Auto Body case study

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Deliverable Length: 1,000 to 5,000 words
APA 6 format with references
All information needed to complete this assignment is attached with the assignment.
1.
Using the case study Jim’s Auto Body, prepare an audit program to audit revenue. You will use all of the
relevant management assertions as the audit objectives, and you should include the following:
•
•
•
•
Management assertions to be addressed (audit objectives)
Internal control
Test of controls
Substantive test of transactions
2.
After the audit program has been drafted, identify the type of report that will be produced as a result of
the audit of revenue, and develop the audit report.
The American Institute of Certified Public Accountants (AICPA) professional standards provide uniform
wording and format for the audit report. The audit report should focus on the revenue cycle and Jim’s
Auto Body. Write a 1-page audit report for Jim’s Auto Body that includes all seven parts of a standard
audit report, as follows:
3.
•
•
•
•
•
•
•
Report title
Audit report address
Introductory paragraphs
Scope paragraph
Opinion paragraph
Name of the Certified Public Accountant (CPA) firm
Audit report date
Additional Information Needed:
Jim’s Auto Body (Inc., or LLC)
1122 Sesame Street
New York, NY, 10002
EIN 90-1234567
Dated incorporated January 1st, 2010
Jim Jameson
8701 Electric Avenue
New York, NY, 10002SSN: 123-45-6789
•
•
•
Jim Jameson took on Fred as a partner for the LLC. Fred owns 50% of all profits, losses, and capital. You do
not have to complete Part 2 K, L, or M on the 1065 Schedule K1 (there is not enough information
provided).
$4,500 salary expense is officer’s compensation for the corporation and guaranteed payment to partners
for the LLC.
$55,000 equipment is 7-year property in its 5th year of service and was placed into service in the middle
of the year, thus using the half-year convention. Use the correct table from the IRS—Publication 946: How
to Depreciate Property—to determine the tax deductible depreciation. Form 4562 is not required.
•
•
•
Jim made four quarterly estimated tax payments of $800 each over the course of the year.
In accordance with IRS instructions: “Corporations with total receipts and total assets at the end of the tax
year less than $250,000 are not required to complete Schedules L, M-1, and M-2” (Internal Revenue
Service, n.d.). This also applies to the LLC.
For the 1065 Schedule K1, you will not have enough information to fill out Part 2 K, L, and M.
Deliverable Length: 1,000 to 5,000 words
APA 6 format with references
All information needed to complete this assignment is attached with the assignment.
1.
Using the case study Jim’s Auto Body, prepare an audit program to audit revenue. You will use all of the
relevant management assertions as the audit objectives, and you should include the following:




Management assertions to be addressed (audit objectives)
Internal control
Test of controls
Substantive test of transactions
2.
After the audit program has been drafted, identify the type of report that will be produced as a result of
the audit of revenue, and develop the audit report.
The American Institute of Certified Public Accountants (AICPA) professional standards provide uniform
wording and format for the audit report. The audit report should focus on the revenue cycle and Jim’s
Auto Body. Write a 1-page audit report for Jim’s Auto Body that includes all seven parts of a standard
audit report, as follows:
3.







Report title
Audit report address
Introductory paragraphs
Scope paragraph
Opinion paragraph
Name of the Certified Public Accountant (CPA) firm
Audit report date
Additional Information Needed:
Jim’s Auto Body (Inc., or LLC)
1122 Sesame Street
New York, NY, 10002
EIN 90-1234567
Dated incorporated January 1st, 2010
Jim Jameson
8701 Electric Avenue
New York, NY, 10002SSN: 123-45-6789



Jim Jameson took on Fred as a partner for the LLC. Fred owns 50% of all profits, losses, and capital. You do
not have to complete Part 2 K, L, or M on the 1065 Schedule K1 (there is not enough information
provided).
$4,500 salary expense is officer’s compensation for the corporation and guaranteed payment to partners
for the LLC.
$55,000 equipment is 7-year property in its 5th year of service and was placed into service in the middle
of the year, thus using the half-year convention. Use the correct table from the IRS—Publication 946: How
to Depreciate Property—to determine the tax deductible depreciation. Form 4562 is not required.



Jim made four quarterly estimated tax payments of $800 each over the course of the year.
In accordance with IRS instructions: “Corporations with total receipts and total assets at the end of the tax
year less than $250,000 are not required to complete Schedules L, M-1, and M-2″ (Internal Revenue
Service, n.d.). This also applies to the LLC.
For the 1065 Schedule K1, you will not have enough information to fill out Part 2 K, L, and M.
Jim’s Auto Body
Revenues:
Service Revenue
Total Revenue
$
$
28.000,00
28.000,00
$
7.000,00
$
21.000,00
$
500,00
$
$
8.000,00
3,000
11.000,00
$
150,000
19.000,00
Expenses:
Salary Expense
Rent Expense
Utility Expense
Depreciation Expense
Insurance Expense
Supply Expense
$
$
$
$
$
$
4.500,00
1.200,00
300,00
500,00
100,00
400,00
Net Income
Jim’s Auto Body
Balance Sheet
As of April 30, 2015
Assets
Cash $
Acct Rec’able
PP In $
Equipment
Accu. Dep.
Supplies $
$
101.800,00
20,000
1.100,00
55,000
2.600,00
180.000,00
______________________________________________
______________________________________________
Total Assets
Liabilities and Stockholders’ Equity
Liabilities:
Accounts Payable
Salary Payable
Total Liabilities
Stockholders’ Equity:
Common Stock
Retained Earnings
______________________________________________
______________________________________________
Total Stockholders’ Equity
$
169.000,00
Total Liabilities and Stockholders’
Equity $
180.000,00
______________________________________________
______________________________________________
1120
Form
Department of the Treasury
Internal Revenue Service
A Check if:
1 a Consolidated return
(attach Form 851)
b Life/nonlife consolidated return .
2 Personal holding co.
(attach Sch. PH) .
3 Personal service corp.
(see instructions) .
4 Schedule M-3 attached
.D
.D
.D
.D
D
1a
b
C
Q)
0
u
-;;C
U.S. Corporation Income Tax Return
For calendar year 2018 or tax year beginning ——————-, 2018, ending ——————-·,20 ——� Go to www.irs.gov/Form1120 for instructions and the latest information.
JIM’S AUTO BODY INC.
TYPE
Number, street, and room or suite no. If a P.O. box, see instructions.
OR
1122 Sesame Street
PRINT
D Initial return
(2)
..
t;
..
.e
,2
Ill
C
0
:I
Ill
Q)
Q)
Ill
C
0
t;:I
,,
” ..
� ll
tJ C
i
i:
j5
..
�
a:
$28,000.00
I
I
28000
1c
0
28000
5
6
7
Gross rents
Gross royalties
6
7
Capital gain net income (attach Schedule D (Form 1120))
8
9
10
11
12
8
9
10
11
12
5
Net gain or (loss) from Form 4797, Part II, line 17 (attach Form 4797)
Other income (see instructions-attach statement)
�
�
Total income. Add lines 3 throuah 10
Compensation of officers (see instructions-attach Form 1125-E)
15
16
17
Taxes and licenses
18
19
20
21
22
Interest (see instructions)
Charitable contributions .
Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return (attach Form 4562) .
Depletion
Advertising
18
19
20
21
22
23
24
Pension, profit-sharing, etc., plans
Employee benefit programs
23
24
25
Reserved for future use
25
26
27
Other deductions (attach statement)
Total deductions. Add lines 12 through 26
28
29a
Taxable income before net operating loss deduction and special deductions. Subtract line 27 from line 11.
Net operating loss deduction (see instructions) . . . . . . . . .
29a
01
Special deductions (Schedule C, line 24, column (c))
29b
28
Add lines 29a and 29b
Taxable income. Subtract line 29c from line 28. See instructions
29c
b
�
I
I
I
ol
I
30
31
32
Total tax (Schedule J, Part I, line 11)
2018 net 965 tax liability paid (Schedule J, Part II, line 12) .
33
34
35
Total payments, credits, and section 965 net tax liability (Schedule J, Part Ill, line 23)
Estimated tax penalty. See instructions. Check if Form 2220 is attached
Amount owed. If line 33 is smaller than the total of lines 31, 32, and 34, enter amount owed
36
Overpayment. If line 33 is larger than the total of lines 31, 32, and 34, enter amount overpaid
37
Enter amount from line 36 you want: Credited to 2019 estimated tax�
Sign
Here
4500
13
14
Repairs and maintenance
16
17
I
01
3
4
C
C
I
Gross profit. Subtract line 2 from line 1c .
Dividends and inclusions (Schedule C, line 23, column (a)) .
Interest
Q)
,,
1b
$180,000.00
D Address change
3
4
Bad debts .
Rents
�
I
$
(4)
2
15
!
D Name change
(3)
1a
Cost of goods sold (attach Form 1125-A) .
Q)
C
0
Ill
C
0
D Total assets (see instructions)
2
Salaries and wages (less employment credits)
,,
Final return
I
13
14
:I
I!’.]
Gross receipts or sales
Returns and allowances .
Balance. Subtract line 1b from line 1a
u
0
C Date incorporated
January 1, 2010
City or town, state or province, country, and ZIP or foreign postal code
E Check if: (1)
�@18
B Employer identification number
90-1234567
Name
New York, NY, 10002
0MB No. 1545-0123
$1,200.00
3929
$300.00
500
10429
26
27
0
17571
30
31
32
I
�o
33
34
Refunded�
36
37
35
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct,
and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
May the IRS discuss this return
with the preparer shown below?
�
�
See instructions. Oves 0No
Date
Title
Signature of officer
Paid
Preparer
Use Only
Print/Type preparer’s name
Firm’s name
�
I
I
Preparer’s signature
I
Date
Firm’s address �
For Paperwork Reduction Act Notice, see separate instructions.
Cat. No. 114500
D
Check
if
self-employed
I Firm’s EIN �
I Phone no.
PTIN
Form 1120 (2018)
Form 1120 (2018)
Schedule C
Page2
Dividends, Inclusions, and Special Deductions (see
instructions)
1
Dividends from less-than-20%-owned domestic corporations (other than debt-financed
stock)
2
Dividends from 20%-or-more-owned domestic corporations (other than debt-financed
stock)
3
Dividends on certain debt-financed stock of domestic and foreign corporations
4
Dividends on certain preferred stock of less-than-20%-owned public utilities
5
Dividends on certain preferred stock of 20%-or-more-owned public utilities .
6
Dividends from less-than-20%-owned foreign corporations and certain FSCs
7
Dividends from 20%-or-more-owned foreign corporations and certain FSCs
8
Dividends from wholly owned foreign subsidiaries
(a) Dividends and
inclusions
(b) %
(c) Special deductions
(a) X (b)
Subtotal. Add lines 1 through 8. See instructions for limitations
9
10
Dividends from domestic corporations received by a small business investment
company operating under the Small Business Investment Act of 1958
11
Dividends from affiliated group members
12
Dividends from certain FSCs
13
Foreign-source portion of dividends received from a specified 10%-owned foreign
corporation (excluding hybrid dividends) (see instructions) .
14
Dividends from foreign corporations not included on line 3, 6, 7, 8, 11, 12, or 13
(including any hybrid dividends) .
15
Section 965(a) inclusion .
16a
Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of
the stock of a lower-tier foreign corporation treated as a dividend (attach Form(s) 5471)
(see instructions) .
b
Subpart F inclusions derived from hybrid dividends of tiered corporations (attach Form(s)
5471) (see instructions) .
c
Other inclusions from CFCs under subpart F not included on line 15, 16a, 16b, or 17
(attach Form(s) 5471) (see instructions).
17
Global Intangible Low-Taxed Income (GILTI) (attach Form(s) 5471 and Form 8992) .
18
Gross-up for foreign taxes deemed paid
19
IC-DISC and former DISC dividends not included on line 1, 2, or 3
20
Other dividends
21
Deduction for dividends paid on certain preferred stock of public utilities
22
Section 250 deduction (attach Form 8993)
23
Total dividends and inclusions. Add lines 9 through 20. Enter here and on page 1,
24
Total s ecial deductions. Add lines 9 throu h 22, column c . Enter here and on a e 1, line 29b
.
line 4
Form 1120 (2018)
Form
U.S. Income Tax Return for an S Corporation
1120S
Department of the Treasury
Internal Revenue Service
. –
, 20
Name
TYPE
B Business activity code
number (see instructions)
OR
PRINT
I I
I © 18
, 2018, ending
For calendar year 2018 or tax year beginning
A S election effective date
C Check if Sch M 3 attached
OMB No. 1545-0123
Do not file this form unless the corporation has filed or is
attaching Form 2553 to elect to be an S corporation.
Go to www.irs.gov / Form1120S for instructions and the latest information.
D Employer identification number
90-1234567
JIM’S AUTO BODY INC.
Number, street, and room or suite no. If a P.O. box, see instructions.
1122 Sesame Street
E Date incorporated
January 1, 2010
City or town, state or province, country, and ZIP or foreign postal code
F Total assets (see instructions)
New York, NY, 10002
$
$180,000.00
G Is the corporation electing to be an S corporation beginning with this tax year? D Yes D No
If “ Yes,” attach Form 2553 if not already filed
S election termination or revocation
Name change (3)
Address change (4)
Amended return (5)
H Check if: (1) 0 Final return (2)
I Enter the number of shareholders who were shareholders during any part of the tax year
Caution: Include only trade or business income and expenses on lines 1 a through 21. See the instructions for more information.
$ 28,000.00
1a Gross receipts or sales
1a
b
c
a>
E
o
I1
°
I
%
3
I
8
in
1
E
«.
Q
D
(0
3
i
–
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22a
b
c
23a
b
c
d
e
24
25
26
27
Sign
Here
0
Returns and allowances . . . .
1b
Balance. Subtract line 1b from line 1a
Cost of goods sold (attach Form 1125-A)
Gross profit. Subtract line 2 from line 1c
Net gain (loss) from Form 4797, line 17 (attach Form 4797)
Other income (loss) (see instructions — attach statement) .
Total income (loss). Add lines 3 through 5
Compensation of officers (see instructions — attach Form 1125-E)
Salaries and wages (less employment credits)
Repairs and maintenance
Bad debts
Rents
Taxes and licenses
Interest (see instructions)
Depreciation not claimed on Form 1125-A or elsewhere on return (attach Form 4562) . . . .
Depletion (Do not deduct oil and gas depletion.)
Advertising
Pension, profit-sharing, etc., plans
Employee benefit programs
Other deductions (attach statement)
Total deductions. Add lines 7 through 19
Ordinary business income (loss). Subtract line 20 from line 6
0
Excess net passive income or LIFO recapture tax (see instructions) . 22a
0
Tax from Schedule D (Form 1120S)
22b
Add lines 22a and 22 b (see instructions for additional taxes) . . .
2018 estimated tax payments and 2017 overpayment credited to 2018 23a
23b
Tax deposited with Form 7004
23c
Credit for federal tax paid on fuels (attach Form 4136)
Refundable credit from Form 8827, line 8c
23d
Add lines 23a through 23d
Estimated tax penalty (see instructions). Check if Form 2220 is attached
D
Amount owed. If line 23e is smaller than the total of lines 22c and 24, enter amount owed . .
Overpayment. If line 23e is larger than the total of lines 22c and 24, enter amount overpaid . .
Enter amount from line 26: Credited to 2019 estimated tax
Refunded
28000
0
28000
1c
2
3
4
5
28000
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
4500
$1,200.00
$500.00
$300.00
500
7000
21000
0
22c
23e
24
25
26
27
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true,
correct, and complete Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge
May the IRS discuss this return
.
.
Date
Signature of officer
Paid
Preparer
Use Only
Print/Type preparer ’s name
Preparer’s signature
with the preparer shown below
(see instructions)?
Yes
No
Q
Title
Date
O
Firm’s EIN
Firm’s name
Phone no.
Firm’s address
For Paperwork Reduction Act Notice, see separate instructions.
O
Check
if PTIN
self-employed
Cat. No. 1151OH
Form 1120S {2018)
Form 1120S (2018)
Schedule B
1
2
Page
b D Accrual
a D Cash
c
Other (specify)
See the instructions and enter the:
b Product or service
a Business activity
Check accounting method:
Yes No
3
At any time during the tax year, was any shareholder of the corporation a disregarded entity, a trust, an estate, or a
nominee or similar person? If “ Yes, ” attach Schedule B-1, Information on Certain Shareholders of an S Corporation . .
4
At the end of the tax year , did the corporation:
Own directly 20% or more, or own, directly or indirectly, 50% or more of the total stock issued and outstanding of any
foreign or domestic corporation? For rules of constructive ownership, see instructions. If “ Yes,” complete (i) through (v)
below
a
(i) Name of Corporation
b
b
6
7
(ii) Employer Identification
Number (if any)
(iii) Country of
(iv) Percentage of
Incorporation
Stock Owned
(v) If Percentage in (iv) is 100%, Enter
the Date (if any) a Qualified Subchapter
S Subsidiary Election Was Made
Own directly an interest of 20% or more, or own, directly or indirectly, an interest of 50% or more in the profit , loss, or
capital in any foreign or domestic partnership (including an entity treated as a partnership) or in the beneficial interest of a
trust ? For rules of constructive ownership, see instructions. If “ Yes, ” complete (i) through (v) below
(i) Name of Entity
5a
2
Other Information (see instructions)
(ii) Employer Identification
Number (if any)
(iii) Type of Entity
(iv) Country of
Organization
(v) Maximum Percentage Owned in
Profit, Loss, or Capital
At the end of the tax year , did the corporation have any outstanding shares of restricted stock?
If “ Yes,” complete lines (i) and (ii) below.
(i)
Total shares of restricted stock
(ii) Total shares of non-restricted stock
At the end of the tax year , did the corporation have any outstanding stock options, warrants, or similar instruments?
If “ Yes,” complete lines (i) and (ii) below.
(i)
Total shares of stock outstanding at the end of the tax year
(ii) Total shares of stock outstanding if all instruments were executed
Has this corporation filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement , to provide
information on any reportable transaction?
Check this box if the corporation issued publicly offered debt instruments with original issue discount . . . .
EH
^
If checked, the corporation may have to file Form 8281, Information Return for Publicly Offered Original Issue Discount
Instruments.
8
If the corporation (a) was a C corporation before it elected to be an S corporation or the corporation acquired an asset with a
basis determined by reference to the basis of the asset (or the basis of any other property) in the hands of a C corporation and
(b) has net unrealized built-in gain in excess of the net recognized built-in gain from prior years, enter the net unrealized built- in
$
gain reduced by net recognized built-in gain from prior years (see instructions)
9
Did the corporation have an election under section 163(j) for any real property trade or business or any farming bu …
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