Question

In: Accounting

Audit standards require that several levels of review occur. The senior accountants' review is required to...

Audit standards require that several levels of review occur. The senior accountants' review is required to ensure that the staff has performed the required audit procedures and that findings and conclusions are well documented. Managers and partners review at a higher level. Their intent is to ensure that GAAS has been applied and met, that conclusions are appropriate, and that the working papers all tie together, and no open items exist. A second partner is required to ensure that the quality control process has been met and to provide another opinion on the application and meeting of GAAS requirements.   This is an area that is often focused on when litigation occurs against an audit firm.

EKH Industries was audited by BK&D CPAs. Four different individuals performed reviews of the working papers: Sarah A. Concurring partner), Emily R.  (Partner), Laura B. (Manager), and Joe J. (Senior Associate), Emily's review comments included inconsistent amounts between working papers for the same accounts; for example, the gain on the sale of assets did not match between the property working papers and the cash flow support. Laura's comments indicated inconsistent trends--some working papers talked about rising labor costs, while others discussed layoffs of plant personnel. Joe documented that cutoff was not properly tested for cash accounts and that accounts receivable testing was missing a conclusion. Sarah indicated that signoffs were not appropriate, the working papers were not dated appropriately, and the drafts had been issued too early.

Please answer the following:

  1. Does it appear that the engagement team had the appropriate personnel reviewing workpapers based on the Audit Standards listed above?
  2. Why is the documentation, conclusion, and accumulation of audit evidence important for the auditor to maintain?

Solutions

Expert Solution


Related Solutions

Audit standards require the auditor to consider the combined amount of misstatement early in the audit....
Audit standards require the auditor to consider the combined amount of misstatement early in the audit. This is known as preliminary materiality judgment. List and discuss the three main factors that affect an auditor's preliminary judgment about materiality.
You are an audit senior at Morton and Lowe Chartered Accountants LLP. The firm has recently...
You are an audit senior at Morton and Lowe Chartered Accountants LLP. The firm has recently begun to perform audits and has two partners, managers, senior and junior staff accountants respectively. Your firm has recently been approached by Don Cherry, the owner of Maple Leaf Construction, to be engaged in their upcoming audit. The company’s bank requires them to submit annual audited financial statements 60 days after year end. In addition to submitting the statements to the bank, the company...
Which of the following are required to be included in an audit report under the Standards...
Which of the following are required to be included in an audit report under the Standards of the PCAOB? the name of the audit partner responsible for the audit the signature of the audit firm that issued the audit report statement that the firm is a member of the AICPa All above 2. The auditor was unable to audit a portion of the financial statements that was very highly material. If the audit client insists that the auditor issue a...
State the audit opinion that is required in each of the following circumstances and levels of...
State the audit opinion that is required in each of the following circumstances and levels of materiality: (i) Circumstance: The auditor is unable to obtain sufficient appropriate evidence concerning sales and inventory levels. Level of materiality: Material and pervasive. (ii) Circumstance: The auditor and management disagree about the application of accounting policies. Level of materiality: Material and pervasive. (iii) Circumstance: The auditor and management disagree about a disclosure. Level of materiality: Material but not pervasive (iv) Circumstance: The auditor is...
Required Audit Manager Sharon Gallagher and Audit Senior Josh Thomas previously met with the Cloud 9...
Required Audit Manager Sharon Gallagher and Audit Senior Josh Thomas previously met with the Cloud 9 Ltd. Finance Director, David Collier, to gain an understanding of the internal controls at the entity level. Based on their interview, they have assessed those controls as being effective. Therefore, at a high level, the company demonstrates an environment where potential misstatements are prevented or detected. You have been assigned the task of documenting the understanding of the process for recording sales, accounts receivable,...
13-Those auditing standards require that the auditor plans and performs an audit to obtain reasonable assurance...
13-Those auditing standards require that the auditor plans and performs an audit to obtain reasonable assurance whether the financial statements are free of: to SOX the in USA is responsible to prepare additional report about:         a – material misstatement           b- errors             c- fraud              d-none of the above   14-“In my opinion, these financial statements present fairly, in all material respects, the financial position of the company as at  .........., 19..... and the results of its  operations and the changes in its financial position for the year...
Auditing standards require that audit firmsinvestigate a prospective client (i.e. new client) priorto accepting an engagement....
Auditing standards require that audit firmsinvestigate a prospective client (i.e. new client) priorto accepting an engagement. One of the procedures that the successor auditor should carry out to investigate a prospective client is to communicate with the predecessor auditor. Auditing standards also state that the auditor should establish an understanding with the audit client about the terms of the engagement and should document the understanding through a written communication with the client by means of an engagement letter. Rodent Limited...
What professional standards require accounting firms to develop quality controls for their audit practices? what key...
What professional standards require accounting firms to develop quality controls for their audit practices? what key issues should such quality controls address? In commenting on Deloitte's quality controls, the PCAOB referred to the culture of the firm. what are the key factors or conditions that influence the culture within an accounting firms audit practice?
Worthington Department Stores Auditing standards require the auditor to obtain sufficient appropriate audit evidence (AS 1105.04:...
Worthington Department Stores Auditing standards require the auditor to obtain sufficient appropriate audit evidence (AS 1105.04: Audit Evidence). The audit firm of Hepple & Ramsey was investigated for the audit of Worthington. Worthington is a large discount catalog department store chain. The company recently expanded from 6 to 43 stores by borrowing from several large financial institutions and from a public offering of common stock. A recent investigation has disclosed that Worthington materially overstated net income. This was accomplished by...
Assignment #2 Integrated Audit Practice Case 1. AICPA auditing standards require a discussion among the engagement...
Assignment #2 Integrated Audit Practice Case 1. AICPA auditing standards require a discussion among the engagement team about the susceptibility of the financial statements to material misstatement. What are some of the purposes of this discussion? 2. The auditor reviews important financial statement numbers and ratios at both the beginning and the completion of the audit. Compare and contrast the purposes of (1) preliminary analytical procedures and (2) analytical procedures performed near the completion of the audit. 3. When you...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT