Essay on Discussion Questions Ch 7,8,9

1483 Words Dec 4th, 2012 6 Pages
What are the purposes of the two parts of the report of management?
The purpose of the first part of the report of management is for management to state its responsibilities for internal control over financial reporting. The Second part of the report states management’s responsibility for the fair presentation of the financial statements.

What is the auditor’s responsibility related to the report of management?
The auditor’s responsibility is to express an opinion on the fairness of the presentation of the financials, and an opinion on the effectiveness of internal control of financial reporting, including an opinion on whether management’s assessment of internal control is fairly stated.

Explain the differences among
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The adequacy of the confirmations as evidence is underminded by the knowledge that the client told the suppliers how to respond. In reality, the auditor should have verified the confirmed balances using alternative procedures. There is no discussion of alternate procedures for nonresponses or the resolution of six responses that were not reconciled to Grande’s records.
The auditors agreed to an adjustment of $260,000 when their cutoff tests indicated a potential liability of $500,000. It would be appropriate for the auditors to agree to a lower amount only if additional testing supported the lower accrued liability.

The auditor should also obtain the next year’s minutes, probably for February 2006, to make sure the previous minutes referred to were those from September 16, 2005. Additionally, the auditor will request the client to include a statement in the client representation letter stating that all minutes were provided to the auditor.

INFORMATION RELEVANT TO 2005 AUDIT | AUDIT ACTION REQUIRED | February 15:1. Approval for increased distribution costs of $500,000 | During analytical procedures, an increase of $500,000 should be expected for distribution costs. | 2. Unresolved tax dispute. | Evaluate resolution of dispute and adequacy of disclosure in the financial statements if this is a material uncertainty. | 3. Computer equipment donated. |

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