Question

The PCAOB web site has a section titled “Settled Disciplinary Orders”. Locate the findings involving Kent M. Bowman, CPA, of Salt Lake City, Utah, involving the audit of Active Care, Inc.

A. Describe the situations and accounting/audit issues that led to the disciplinary action by the PCAOB.

B. There was an issue related to an audit confirmation sent to a customer of the client in this case.   Please describe the issue and how the Bowman’s audit team handled or responded to the confirmation.   What would you have done related to this confirmation response?

C. What can you find of Bowman’s background? Is he still with the Tanner CPA firm?

D. What do you think of the Bowman’s understanding of generally accepted auditing standards and generally accepted accounting principles? Name one specific area where auditing standards were violated.

E. Two lessons you learned from reading of this audit situation?

Answer 1

A.

The Board is impressive these sanctions on the basis of its findings that the Firm violated a rule of the Securities and replace Commission ("Commission" or "SEC") as a result of having maintained and prepared accounting records, and having prepared financial statements that were filed with the payment, for a registered broker-dealer audit client and thus impairing its independence.

B.

            GAAS requires auditors to maintain strict freedom from their audit clients. 3 "[I]f an auditor's report states that its audit was in accordance with GAAS when the auditor was not independent, then it has violated Rule 17a-5(i)."

Connection with the Audit, the Firm contracted with another accounting firm ("Contract Firm") to have two professions

ales at the Contract Firm perform audit work. The two Contract Firm professional were directed and supervise in their work by a Firm partner who served as the engagement partner responsible for the Audit. Together, the Contract Firm professionals and the engagement partner made up the engagement team.

The engagement team identified in a work paper titled "Overall Risks and Responses" a risk that the Broker-Dealer's management had a"[l] ack of expertise in the preparation of financial statements (primarily related to disclosures)." In response to that risk, the meeting team noted that it "prepares the financial statements" for the Broker-Dealer and, in order to do so, uses "a disclosure checklist" and "ma[kes] numerous inquiries of management to include all required disclosures."

In preparing those financial statements, the engagement team aggregate line items, changed line item descriptions and amount s, and added, deleted, and changed captions as compared to corresponding information in the documents obtained from the Broker-Dealer.

From the above statement it can be concluded that the management team has not carried out the activities as per the meeting letter and there was negligence on part of the partners to adhere to the prescribed guidelines.

C.

The qualification required for conduct the audit is licensed public accountant.