Chapter 12 Auditing Essay examples

5) No they did not comply with GAAS because the independent auditor had conflicts of interest. Two of the three partners of the firm that performed the audit for the district had 55% ownership in the company that sold the district its financial management software “finance manager”. The partners’ role as vendors violated the general standard of independence under generally accepted government auditing standards. Also the auditors received a commission from the sale of another software called “student manager” and receiving commissions is prohibited by the AICPA.

The qualified opinion report is similar in arrangement to the unqualified report with an additional paragraph dictating the reason the audit report is not unqualified. The third report although rare is an adverse opinion. An adverse opinion report is required when in the auditor’s opinion the financial statements as a whole do not conform to GAAP and are grossly misrepresented. The fourth and final report is a disclaimer of opinion. A disclaimer report is issued when the auditor is unable to gather sufficient information pertaining to the financial reports that an opinion cannot be determined. The auditor’s report has a direct impact on a company’s ability to obtain financing from a bank as the report lowers the cost of capital. The audit report also provides commercial value, meaning it’s an assurance the financial data is true and correct. The independent auditor for Verizon indicates an unqualified opinion in that Verizon’s

in order to obtain stronger or more persuasive evidence, the “bank balance” reported by the

a.  An accrual is not made for a loss contingency because any of the conditions in paragraph 450-20-25-2 are not met.

The auditor must review disclosures for adequacy, and if the auditor concludes that information disclosures are not reasonably adequate, the auditor must state so in the auditor’s

14. In which paragraph of the standard audit report does the auditor communicate to the user that certain combining fund information in the financial statements is not part of the basic financial statements, but that such information has been subjected to auditing procedures and, in his or her opinion, is fairly presented in all material respects in relation to the basic financial statements?

Quality Objectives - The quality objectives define measurable goals relative to the company's quality management system. Requirements on the quality objectives are in ISO 9001:2008 section 5.4.1.

Exceptions can be approved by the Board and are made in cases where the revenue paid for such services contributes less than 5% of revenues paid to the auditing firm. Also, a public accounting firm may provide these non-audit services along with audit services if it is pre-approved by the audit committee of the public company. The audit committee will disclose to investors in periodic reports its decision to approve the performance of non-audit services and audit services by the same accounting firm. This requirement to disclose to investors is likely to inhibit auditing committees from approving the performance of auditing and non-auditing services by the same accounting firm. Other sections outline audit partner rotations, accounting firm reporting procedures, and executive officer independence. Specifically, subsection 206 states that the CEO, Controller, CFO, Chief Accounting Officer or similarly positioned employees cannot have been employed by the company's audit firm for one year prior to the audit.

In the present day forensic accounting plays a huge role in many of the court cases publicized by the media. With the spotlight on the profession, this is a good opportunity to discuss the following topics:

material, but don’t really affect the financial statements then the opinion given by the auditor may be a qualified opinion with explanations; if the limitations are so material that the financial

The allowance for doubtful accounts is lower than last year even though the receivables and the revenue are higher. This does not follow any form of consistency in that case. GAAP only allows the establishment of the allowance for doubtful accounts that are supported by appropriate analyses and that the policy is well documented and applied consistently from period to period. Again, without additional information the consistency item is an issue here.

3. A) If I were put in this situation as an equity investor, I would absolutely pursue legal actions against the auditors. If there was a

In our opinion, with proper use of analytical procedures Ernst & Whinney should have detected the overstatement of the leased assets. The following analytical procedures should have been used, at least at the planning and overall review stages of the audit.

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

Under the Sarbanes-Oxley Act of 2002, reports on internal control are required. Did the company’s management acknowledge its responsibility for establishing and