Zzzz Best Case 1.9

577 Words Jan 12th, 2015 3 Pages
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? 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 …show more content…
Tom Padgett made the confirmations and management provided the paperwork, yet all the sources were involved in the fraud.
3. In testimony before Congress, George Greenspan reported that one means he used to audit the insurance restoration contracts was to verify that his client actually received payment on those jobs. How can such apparently reliable evidence lead an auditor to an improper conclusion?
It is possible for an auditor to come to an improper conclusion because documents, like invoices, could be easily falsified if management originally handles them or if the auditor receives them from management, like in the case of ZZZZ Best and Minkow. The auditor must always confirm payments directly with the third party.
4. What is the purpose of predecessors-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.
The purpose of the predecessor-successor auditor communication is to inform the successor auditor of the nature of the industry and specific attributes of the client to help determine if the successor auditor wants to take them on as a client. It is the responsibility of the successor auditor, with the client’s permission, to initiate communication with the predecessor