Question

You are the manager of the examination engagement of the financial projection of Honey's Health Foods as of December 31, 2015, and for the year then ended. The audit senior, Currie, has prepared the following draft of the examination report:

   To the Board of Director's of Honey's Health Foods:   

We have examined the accompanying projected balance sheet and statements of income, retained earnings, and cash flows of Honey's Health Foods as of December 31,2015, and for the year then ending. Our examination was made in accordance with standards for an examination of a projection and accordingly included such procedures as we considered necessary to evaluate the assumptions used by management.

In our opinion, the accompanying forcast is presented in conformity with guidelines for presentation of a forecast established by the American Institute of Certified Public Accountants, and the underlying assumptions provide a reasonable basis for management's prrojection. However, there will usually be differences between the projected and actual results because events and circumstances frequently do not occur as expected, and those differneces may be material.   

LIbby & Nelson, CPAs -

Question: Please Identify the deficiencies in Currie's draft of the examination report. Group the deficiaencies by paragraph.

Answer 1

I am the manager of the examination engagement of the financial projection of Honey's Health Foods as of December 31, 2015, and for the year then ended. The audit senior, Currie, has prepared the following draft of the examination report:

Currie's draft examination report contains lot of deficiencies and the report does npot look like a standard report which we generally sees in other locations as below

• The examination report does not contain basic details required as per the examination report criteria. By looking at the report, it does not look like that it is an structured report prepared by audit/examination professional. It does not reflect the details of bases of examination and the actual findings at the work place. Their key differences and the criteria for acceptance of the differences. The report looks to be not useful for any organization.
• The examination report does not contain the key details of the balance sheet being discussed in the report – Balanced sheet number, year, identification details etc.
• The examination report does not contain any figures and details of the balance sheet being discussed in the report. Such information supposed to be captured in the report for easy referencing purpose for the reader.
• The examination report does not contain the details of the base standard name, number, revision etc so that it can be traced with the standards basic requirements. This is generally must for an examination / audit report. It does not contain any procedures name, number and , details.
• The forecast details are not mentioned and the guidelines of American certifying public accountant are not mentioned and it does not show how the forecast is matching with the recommended guidelines. Thus key important information is missing completely.
• The report does not contain the criteria for acceptance level between the forecast value and the actual value. This is the key requirements for the improvements for the unit’s forecasting process; else it will never be improved.

Thus by looking at the examination report, it does not look like a professional examination report as it does not contain all the above key data and information, which is a basic requirement of any examination/audit report for any firm.