ZZZZ Best Case Study: Understanding Audit and Review

Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences

Overall, there were three “red flags” E&Y was not aware of during the audit. First, they neglected the 500% net income increase from 1999-2001. This should have raised awareness because revenues only increased by 5% during that same period. Second, the internal auditors were denied access to some of the corporate ledgers. E&Y should have seen this as being one of the largest red flags. Third, the audit team failed to properly investigate employee complaints.

The first step is to contact an agency for a job as a peace officer or a position as a reserve officer. The agency hiring process may include agency testing, physical ability testing, psychological testing and oral boards. The process will include a complete background investigation, polygraph and medical examination. If the agency chooses to hire an applicant, the agency notifies AZPOST by sending an appointment document to AZPOST. AZPOST audits all agency employment packages to ensure that the qualifications for certification are met. Those qualifications can be found in Rules R13-4-105, 106, 107 and 109. Applicants should be mindful that AZPOST establishes the minimum standards. Agencies are free to have stricter standards and many of them do.

4. The SEC wants to understand the reasons behind the auditor change and what they might say about a company’s health and operations. They want to see if the client initiated auditor change was because of things like disagreements over internal control weaknesses or reliability of financial reporting. The registrant must specifically comment on whether the company had any significant disagreements with its auditors over accounting principles, auditing procedures, or other financial reporting matters. The dismissed audit firm must communicate with the SEC, stating whether it agrees with

1. Ernst & Whinney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for the three months ended July 31, 1986. How does a review differ from an audit, particularly in terms of assurance implied by the auditor’s report?

Ernst and Whitney never issued an audit opinion on financial statements of ZZZZ Best but did issue a review report on the company’s quarterly statements for the three months ended July 31, 1986. How does a review differ from an audit, particularly in terms of the level of assurance implied by the auditor’s report?

In situation #2, the manager in Solar – Electro division is also new and not familiar with the warehouse situation that should bring attention to an auditor to evaluate the ability of manager. Also, the engines have been in a warehouse over one year that increases the likelihood of sale problem.

Which party should initiate the communication: The initiative for communicating rests with the successor auditor. The communication may be either written or oral. Both the predecessor and successor auditors should hold in confidence information obtained from each other. This obligation applies whether or not the successor auditor accepts the engagement. The predecessor auditor should respond promptly and fully, on the basis of known facts, to the successor auditor's reasonable inquiries. However, should the predecessor auditor decide, due to unusual

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.

a) What events or condition above may cause substantial doubt about the entity’s ability to continue as a going concern?

In order to analyze this case in depth, it is essential to understand the responsibilities for both PwC and MF Global. As we can see from this case, PwC’s role was MF Global’s independent auditor. We discussed in class that the auditing standards state the overall objectives of the auditor, in conducting an audit of financial statements, are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement and report on the financial statements in accordance with the auditor’s findings. According to the textbook, management is responsible

They seek the permission of the directors to communicate the present auditors. If same is refused, the auditor must reject the proposal.

Employees Trainers Auditors Coverage % 30% 25% 25% 20% 20% 20% 15% 10% 10% 10% 10% Auditees Training Hrs 64 80 96 112 128 160 192 384 576 768 928 Auditor Prep./ Follow-up Time per Auditee 90 150 225 240

1. The internal auditors report directly to the CEO and the CEO is the one who decides on the audit plan.

Currently, an auditor may only resign if he is not the sole auditor of the company and his resignation must be made at a general meeting of the company. If an auditor gives notice in writing to the directors of the company that he wishes to resign, the directors shall call a general meeting of the company as soon as it is practicable. This is for the purposes of appointing an auditor in place of the auditor who wishes to resign and to appoint another auditor. The resignation of the auditor shall take effect upon the appointment of another auditor.