Audit Procedures and Internal Control Evaluation for Smackey Dog Foods, Inc.

Case study of audit methodology and internal control assessment in a pet food company

Michael Davis

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Audit Procedures and Internal Control Evaluation for Smackey Dog Foods,Inc.Q1: Discuss how the SEC has influence (if any) over the audit of Smackey Dog Foods, Inc.Smackey Dog Foods, Inc. is a privately owned company and is not subject to SEC regulations.However, their accounting standards and financial statements must be in conformity with GAAP.During the first stage of the audit, I did research on the dog food industry to better familiarizemyself with the risks currently associated with this industry, such as current economic conditionsand how they have affected this industry, competition, and the audit procedures that are usuallyinvolved in the audit of this type of business.Smackey Dog Foods, Inc. is a small cap privately owned organization in Chicago area. Thecompany was started by the group of sisters. Currently, the organization has grown and islooking towards expanding their business into vertically in various demographics with moreeconomicgrowth.Thecompanycurrentlymanufacturestwokindsofdogfood,theirconventional regular dog food that they started the company with, and their Best Boy Gourmetdog food line which is packaged fresh and served in only single eating pouches. The bank theyare getting the loan for expansion wants audited statements of the company for sanctioning theloan amount.In such situation, the company has hired Keller CPA’s to do a complete audit ofthe company.Q2: Discuss the essential activities involved in the initial planning of an audit. How do theseall specifically to the Smackey Dog Food client?Smackey is at risk of a material misstatement within their inventory due to internal controls inregards to their returns process. This raises a red flag to the auditors that special attention needsto be paid when reviewing the inventory and warehouse cycles. Also, there is no segregation of

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Auditing

Audit Procedures and Internal Control Evaluation for Smackey Dog Foods, Inc.

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