Objectives of a Review and Audit Financial Statements: ZZZZ Best Company, Inc

There were two external auditors mentioned in the case that dealt with ZZZZ Best. The first was not a firm that was included in the Big Eight accounting firms at the time. George Greenspan was the sole practitioner who performed the first full-scope independent audit for ZZZZ Best. Greenspan insisted that he had properly audited Minkow’s company, and testified that while planning the audit he had performed various analytical procedures to identify unusual relationships in ZZZZ Best’s financial data. Greenspan’s procedures reportedly included comparing ZZZZ Best’s key financial ratios with its industry norms. Greenspan identifies “unusual relationships” but does not go into detail in order to explain these unusual relationships. This shows that Greenspan did not show enough professional skepticism while conducting the audit and just blew off these unusual relationships. Also Greenspan testified that he had obtained and reviewed copies of all key documents that pertained to the false insurance restoration contracts. It would have been hard for Greenspan to uncover the fraud through the contract paperwork because Minkow and Morze went through such great detail in creating false documents in order to cover the false contracts, but finer details were overlooked by Greenspan. A journalist found one of these finer details which caused the domino effect leading to the destruction of ZZZZ Best. This shows that the first auditor,

The auditor’s report is a major source of information that officially evaluations an entity's financial status. In conjunction with the auditor’s official evaluation of the entity’s financial status, the auditor provides an assessment of the firm’s monetary position and future. Auditors can provide four types of reports: unqualified opinion, qualified opinion, adverse opinion, and a disclaimer of an opinion. An unqualified opinion (clean report) which is issued in most cases expresses the opinion that financial statements are presented in accordance with general accepted accounting principles and is void of misrepresentations. The unqualified

According to an article in the CPA Journal, the accounting profession has long contended that an audit conducted in accordance with generally accepted auditing standards (GAAS) provides reasonable assurance that there are no material misstatements contained within financial statements. Suggest at least two (2) alternative methods that auditors can use to provide a more concrete level of assurance to investors. Provide support for your responses with examples of such methods in use.

Furthermore, when the internal control is fixed, the outside auditor can rely on the clients system and less audit testing can be conducted. When everything is improved, the management letter is given to the organization’s top management and not disclosed to the public, (Finkler, S. A., Ward, D. M., & Calabrese, T. D., 2013). Next, is the auditor’s report that entails the opinion letter usually written in three paragraphs and given to the board of trustees. Then, the opinion paragraph is added on to state the organizations financial statements are in accordance of the financial position and followed through with (GAAP). The clean opinion addresses the opinion of the auditor and the overall exercising of professionalism. Also, the complete opinion of the financial statements is to give a representation of the organization. All other opinions may be included and can be addressed by adverse opinions if (GAAP) was not in accordance. A qualified opinion can be added if a specific area wasn’t included in the financial statement when needed. Finally, the management reports are conducted by the management team and not the auditors. The management report is the annual report the topics included in the report are the internal control system and the responsibility of the audit committee.

Evaluating the Reasonableness of the Accounting Estimates, and Determining Misstatements: the auditor shall evaluate, based on the audit evidence, whether the accounting estimates in the financial statements are either

It is common industry knowledge that an audit plan provides the specific guidelines auditors must follow when conducting an external audit. External public accounting firms conduct external audits to ensure outside stakeholders that the company’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) standards.

1. There are numerous differences between performing a review and actual audit on the financial statements, but the major one is that the review does not contemplate obtaining an understanding of internal control structure. Also, a review does not assess control risk, tests of accounting records and responses to inquiries by obtaining corroborating evidence through inspection, observation or any other audit procedure. It can point out significant matters of the financial statements but does not provide assurance of their accuracy. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any misstatements on the financial statements. Ernst & Whinney never questioned the internal control, reviewed

A review and an audit report are both a form of an attestation engagement. A Review, however, is less in scope so it provides a moderate level of assurance on the financial statements. It is considered a “sniff” of an audit, which comparatively provides reasonable assurance that no material misstatements occurred. Since a review deals with a limited scope, it does not provide the basis for expressing an opinion on the presentation of the

Did the confidentiality agreement that Minkow required Ernst and Whitney to sign improperly limit the scope of the ZZZZ Best audit? Why or why not? Discuss general circumstances under which confidentiality concerns on the part of a client may properly affect audit planning decisions. At what point do client imposed audit scope limitations affect the type of audit opinion issued?

Ernst & Whinney audit firm suffered tremendously from the backlash of ZZZZ Best’s case. One of the issues stemming from ZZZZ Best’s case is the difference between a review and an audit as evidence by civil suit filed by a California bank against the firm. The bank claimed that its decision to grant ZZZZ Best’s loan was based on the opinion of Ernst & Whinney review of ZZZZ Best’s financial statements period ending July 31, 1986. The case was ruled in favor of Ernst & Whinney as the audit firm had expressly stated in their report that it was not issuing an opinion and the bank should not have rely heavily on the review report. Also, ZZZZ Best was a public company at the time, a review of its

d. “The auditor's reliance on substantive tests to achieve an audit objective related to a particular assertion may be derived from tests of details, from analytical procedures, or from a combination of both. The decision about which procedure or procedures to use to achieve a particular audit objective is based on the auditor's judgment on the expected effectiveness and efficiency of the available procedures. For significant risks of material misstatement, it is unlikely that audit evidence obtained from substantive analytical procedures alone will be sufficient (PCAOB, AS 2305.09).”

The case study General Mills Inc. - Understanding Financial Statements focuses on the most basic idea of finance analysis. This case is a brief look into the language that is used in the finance world and a start to interaction with auditors. In this case, KPMG LLP, the public accounting firm that was auditing their statements, had sent two opinion letters. The first letter was ensuring that both parties were aware that General Mills had internal control over financial reporting. The second opinion letter stated that to auditor’s knowledge, General Mills had correctly reported its financial statements. The statements given in this case study are known as the four general financial statements. Displayed in the case are the

A review is like an audit yet is less in extension and just gives restricted affirmation with respect to the financial statements. This varies with an audit that gives sensible affirmation that no material mistakes or illicit acts are detected. The goal of an audit is to give a sensible freedom of expressed opinion the money related proclamations taken all in all.

with the massive amount of numbers in company financial statements. For example, they can compute the percentage of net profit a company is generating on the funds ithas deployed. All other things remaining the same, a company that earns a higher percentage of profit compared to other companies is a better investment option.

The board acknowledges the diverse nature of regulatory framework in developing concrete and uniform standards. These standards help in proposing and clarifying a complete guidance as well as demonstrating the understanding of complex issues in accounting. Moreover, help in demonstrating advanced knowledge in the application of accounting standards in the preparation and analysis of financial statements.