ZZZZ Best Case Study: Understanding Audit and Review

1205 WordsNov 13, 20135 Pages
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…show more content…
Also, the professional standards do not necessarily require any procedures in reviewing a client’s pre-audit but post-year-end earnings press release. 5. What is the purpose of predecessor-successor auditor communications? Which party, the predecessor or successor auditor, has the responsibility for initiating these communications? Briefly summarize the information that a successor auditor should obtain from the predecessor auditor. A predecessor auditor is an auditor who has reported on the most recent audited financial statements or was engaged to perform but did not complete an audit of the financial statements, and has resigned, declined to stand for reappointment, or been notified that his or her services have been, or may be, terminated. The successor auditor is an auditor who is considering accepting or has already accepted an engagement to audit financial statements, but has not been in communication with the predecessor auditor. Communication between the predecessor and successor auditor is very important as it can yield important information as to whether or not the successor auditor should accept the engagement. There are many possible reasons why the predecessor auditor is no longer serving the client. Whether it was a disagreement on accounting principle, audit procedures, adequate disclosures, limiting the audit scope, or a multitude of other reasons, the successor auditor will need this information

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