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.

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

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

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

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

3. In the auditor 's report the financial statements on which the opinion is being expressed

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 accounts receivable from artists is significantly higher than last year. With 165 artists charged $40 per month, you only have about $6,600 in revenue monthly. However, your accounts receivable from artists is $15,000. This represents more than two months of website revenue. Your revenues doubled by raising the price which has resulted in quadruple the amount of receivables. This leads us to believe that some of these receivables may be uncollectable. According to GAAP, a loss must be recognized when the

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

14. An auditor reporting on group financial statements decides not to take responsibility for the work of a component auditor who audited a 70 percent owned subsidiary and issued an unqualified opinion. The total assets and revenues of the

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:

If the auditor does not concur with the appropriateness of the accounting principle change, in most countries, a qualified opinion is called for. The above considerations have a general nature, i.e. are applicable to any relevant situation, thus, are relevant to the USSC case.

This frequently puts the auditor in the position, in effect, of deciding whether a company is able to obtain the funds it needs to continue operating. Thus, the auditor’s qualification tends to be a self-fulfilling prophecy. The auditor’s expression of uncertainty about the company’s ability to continue may contribute to making it a certainty.

1) Not in accordance with GAAP because they didn’t disclose loss in footnotes, highly material, Adverse.

As noted in Case 1, Lakeside in considering the issuance of stock to the public. Write a report discussing tests of controls for clients that are public companies compared with those that are not public companies. If Lakeside were to become a public company, what impact would that have on Abernethy and Chapman 's tests of controls? Objective – Comparison of internal auditing in the general case and in the public case.