Question

Mike and Dan CPAs, provided the following audit report. The audit for the year ended December 31, 2019 was completed on March 1, 2020, and the report was issued to Jain Corporation, a private company, on March 13, 2020. List at least 7 deficiencies in this report. Do not rewrite the report.

We have examined the accompanying financial statements of Jain Corporation as of December 31, 2019. These financial statements are the responsibility of the company's management.

Management's Responsibility for the Financial Statements:

Management is responsible for the preparation and fair presentation of the financial statements in accordance with generally accepted auditing standards; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from all misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to give an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted throughout the world. Those standards require that we plan and perform the audit to obtain absolute assurance about whether the financial statements are free of misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on management's judgment, including the assessment of the risks of material misstatement of the income statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the auditor's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies and the accuracy of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present accurately the financial position of Javlin Corporation as of December 31, 2096, in conformity with accounting principles generally accepted in the United States of America.

Answer 1

Deficiency no.1 Title and Addressee is Missing   The auditors' report follows a standard format. The title of the document should be simple and straight forward. In addition, it must include the word “independent,” for this informs all readers that the report was created by an unbiased third party.Immediately following the title, the introduction of an audit report is a concise one-paragraph statement. Included is the name of the firm being apprised, as well as the dates that the audit covers.

Deficiency no.2 The typical auditors' report starts with a discussion of who's responsible for what. In this section, the auditors make clear that responsibility for the accuracy of the financial statements rests with the management of the company, which shall be prepared in accordance with the standards known as Generally Accepted Accounting Principles (GAAP). Management is also responsible for setting up adequate policies to ensure that the numbers in the report are trustworthy. But, in the report it is written that management should prepare the financial statements in accordance with generally accepted auditing standards.

Deficiency No.3 Auditors are unable to obtain absolute assurance not because they conduct engagements with insufficient care, but because limitations inherent in the process restrict the ability to guarantee absolute assurance. The Auditors objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Deficiency No.4: The auditor shall perform audit procedures to obtain audit evidences based upon the following factors and not according to management judgment.

1. The auditor's assessment of the risks of material misstatement, including significant risks;
2. The degree of auditor judgment related to areas in the financial statements that involved the application of significant judgment or estimation by management, including estimates with significant measurement uncertainty;
3. The nature and timing of significant unusual transactions and the extent of audit effort and judgment related to these transactions;
4. The degree of auditor subjectivity in applying audit procedures to address the matter or in evaluating the results of those procedures;
5. The nature and extent of audit effort required to address the matter, including the extent of specialized skill or knowledge needed or the nature of consultations outside the engagement team regarding the matter; and nature of audit evidence obtained regarding the matter.

Deficiency No.5:The auditor shall evaluate the internal controls in the organization to form an      opinion on operating effectiveness of the internal controls and report the same to the management. Hence, the auditor should consider the internal controls not only to decide the design of audit procedures but also to obtain assurance about operating effectiveness of internal controls.

Deficiency No.6:The auditors are responsible for forming an opinion that financial statements are presented fairly with the applicable financial reporting framework and not to mention words like accurately and that they are prepared in accordance with generally accepted principles of united states.

Deficiency No.7: Signature, Tenure, Location, and Date Missing : The auditor's report must                 include the these elements.