DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...

DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL
STUDIES IN...
3–23
a.2 b.4 c.3
3–24
a.3 b.4 c.1
3–25
a.3 b.2 c. 3
3–26
a. The auditor cannot say the financial statements are correctly stated. Things could change during
the audition period. And there are some parts that auditor does not responsible for.
Because we cannot audit every single thing.
b. It does not say which accounting principles to follow.
c. Sorry I don't know the answer.
d. Write down the CPA firm rather than the name of the CPA because it's the firm to take responsible
rather than any individual.
e. It's not the auditor's duty to check out whether the financial statements are without mistake, they
only perform to see if they're fairly presented.
3–27
a. The changing of accounting method which ... Show more content on Helpwriting.net ...
6. The company failed to follow accounting principles and it's highly material. The balance sheets
didn't tell you the amount It should be an adverse report. Or could be qualified depending on it's
material or not.
3–29
1. Since the company refuses to write–off the products, it failed to follow the GAAP so it's material,
and is adverse (Depending on the martial or not

It's a GAAP departure
2. It's not material but since the footnote disclosed this should be an unqualified report type with
standard wording.
3. Change of the accounting principles is material. But it's in the footnote so it's unqualified with
explanatory paragraph.
Consistency issue
4. Failed to follow GAAP and it's material. Should be the adverse type of report.
5. It's not material and the audit report is unqualified with standard words.
6. Since the company does not allow the audit to check the receivable this should be a scope
limitation and it's a disclaimer and is highly material.
7. Base on other auditors. This should be an Unqualified with modified wording, just report that
other auditor company is involved and it's not material.
Circumstance first. The auditor's decision is willing to take responsibility is a
3–30
1. The footnote is not fully disclosed and it's highly material. This should be a unqualified with
explanatory paragraph.
2. It's not material and is an unqualified with standard wording.
3. Since the scope of the audit is limited it's a
... Get more on HelpWriting.net ...

Fice Of Comptroller Of Currency
Good morning, your Honor. I am Theresa Pacholik and I am representing Group One. Please let me
introduce my colleagues: Chelsea Rowell, Miles Brown and Kimberly Hudson. We come in front of
you today with our clients, the Office of Comptroller of Currency (OCC) to show why the court
should uphold the decision of the district court against Grant Thornton, LLP. We will discuss the
negligent actions performed during the audit conducted by Grant Thornton and how their unsafe and
unsound practices impacted Keystone Banks' regulators, shareholders and the public.
Background. Grant Thornton LLP vs. FDIC, took place in West Virginia District Court in 2004. We
are here today as a result of the appealed filed by Grant Thornton. In asserting for the OCC, we will
prove why Grant Thornton is responsible for not acting in accordance with the laws and regulations
designed for independent financial institutions while conducting an audit for the First National Bank
of Keystone. The OCC is an independent bureau of the U.S. Department of Treasury that is
responsible for supervising all national banks and federal savings associations, including federal
branches and agencies of foreign banks (Office of the Comptroller of the Currency, 2015). The First
National Bank of Keystone became incorporated in 1904 in Keystone, West Virginia. Keystone
Bank was a member of the National Banking Association within the Federal Reserve System and
originally serviced McDowell County and the surrounding area as

Role Played by Professional Auditors in Uganda
Role played by professional auditors in Uganda
Auditing is the independent examination of financial statements and the underlying books of
account so as to form an opinion on whether they are prepared in all material aspects in accordance
with the financial reporting framework. Such reporting framework includes International
Accounting Standards (IAS), the Companies Act Cap 110 (for Uganda) and any other relevant
legislation. This is however carried out by a person termed as auditor.
Internal Audit, Internal audit is conducted by the internal auditor who is an employee of an
organization. The main purpose of internal audit is to find out whether the internal control system is
working successfully or not. The report of the internal ... Show more content on Helpwriting.net ...
the provision of the company Act
The statement of financial position shows a true and fair view of the state of the company affairs as
at the end of its financial year
The income statement shows a true and fair view of the company profit or loss for its financial year
However there are two complications with this area
Group accounts have to be prepared for holding company and these also have to be prepared to
comply with the company Act and shows a true and fair view
Certain company (Bank, shipping company, insurance company) are exempt from certain company
Act requirements and the charge to the auditor is to give an opinion on whether or not the accounts
have been properly prepared in accordance with the provision of the company Act
Auditor duty to carry out investigation so that they can form an opinion on;
Whether proper books of accounts have been kept by the company
Whether proper returns adequate for audit purposes have been received from branches not visited by
the auditor
Whether the statement of financial position and the income statement is in agreement with the books
of accounts and returns
If the investigation shows that proper books of accounts have not been kept, proper returns not
received or the accounts are not in agreement with the books and the return, then the auditor must
say so in his report
Every auditor of a company shall have a right of access at all times to the books and accounts and
vouchers of the company and to such

Acc 403 Week 7 Discussion Acc403 Week 7 Discussion
ACC403 Complete Course Week 1 to Week 11
Click below link for Answer visit www.workbank247.com
http://workbank247.com/q/acc–403–complete–course–week–1–to–week–11/9673
http://workbank247.com/q/acc–403–complete–course–week–1–to–week–11/9673
ACC 403 Week 1 Discussion
"Auditor's Role and Responsibilities" Please respond to the following:
Compare the primary auditor objectives in auditing historical financial statements to auditing
internal controls over financial reporting. Identify at least two (2) objectives that are the most
significant in reducing the risk of reporting errors or misstatements in financial statements. Provide
a rationale for your response.
Create a scenario where it would be acceptable for an external auditor to accept ... Show more
content on Helpwriting.net ...
Provide a rationale for your response.
According to an article in the CPA Journal, the accounting profession has long contended that an
audit conducted in accordance with generally accepted auditing standards (GAAS) provides
reasonable assurance that there are no material misstatements contained within financial statements.
Suggest at least two (2) alternative methods that auditors can use to provide a more concrete level of
assurance to investors. Provide support for your responses with examples of such methods in use.
ACC 403 Week 3 Homework
Chapter 5: Problems 5–18, 5–20(a–d), and 5–22(a–e)
Chapter 6: Problems 6–23(a–b), 6–25, and 6–32(a–g)
ACC 403 Week 4Discussion
"Evidence Collection Procedures" Please respond to the following:
According to an article in the CPA Journal, the auditor considers reliability of audit evidence
collected and the reliability of that evidence to reduce the risk of financial statements containing
undetected material errors. Compare and contrast at least two (2) types of evidence, and make a
recommendation as to which you believe is the most reliable in reducing risk. Support your position.
From the e–Activity, analyze the primary ways

The National Health Care Billing Audit Guidelines
Internal and outside auditors have a heavy role and responsibility in performing audits, preventing
major accounting errors, and following (GAAP) guidelines. Several duties comprise the role of
internal and outside auditor to follow specific protocol and ensure ethical standards are priority. The
National Health Care Billing Audit Guidelines are relevant to address as well as why audit failures
happen. Finally, how internal vary from external audit and why audits are overall important to health
care organizations. It's vital for health care organizations to maintain all necessary standards to
conduct proper audits and uphold ethical standards for the financial health of the organization.
Outside Auditor's technique for Accuracy
In the ... Show more content on Helpwriting.net ...
Furthermore, when the internal control is fixed, the outside auditor can rely on the clients system
and less audit testing can be conducted. When everything is improved, the management letter is
given to the organization's top management and not disclosed to the public, (Finkler, S. A., Ward, D.
M., & Calabrese, T. D., 2013). Next, is the auditor's report that entails the opinion letter usually
written in three paragraphs and given to the board of trustees. Then, the opinion paragraph is added
on to state the organizations financial statements are in accordance of the financial position and
followed through with (GAAP). The clean opinion addresses the opinion of the auditor and the
overall exercising of professionalism. Also, the complete opinion of the financial statements is to
give a representation of the organization. All other opinions may be included and can be addressed
by adverse opinions if (GAAP) was not in accordance. A qualified opinion can be added if a specific
area wasn't included in the financial statement when needed. Finally, the management reports are
conducted by the management team and not the auditors. The management report is the annual
report the topics included in the report are the internal control system and the responsibility of the
audit committee.
Audit Failures
Audit failures are unfortunate for any health care organization and failed audits are due to financial
statements falling under lack of

Ptl Harbinger Essay
Nazeeha Badran
October 30,2012 PTL Club clear–The Harbinger of things to come? 1. What similar factors led to
the demise of both Laventhol &Horwath, and Anderson?
Both Laventhol and Horwath, and Arthur Anderson accepted clients that were risky just to keep their
revenues up. L&H knew there were things wrong with PTL, especially since they were doing
things that were hidden from the Board, like the payroll account book, which was secret. The
Bakker's would call the senior L&H partner to keep the books updated. Anderson and
L&H allowed their clients to use aggressive accounting practices that were questionable.
Anderson destroyed Enron's documents because they knew an SEC investigation was imminent.
L&H and ... Show more content on Helpwriting.net ...
A CPA firm can prevent this type of behavior by talking to their client and explaining to them that
they are not allowed to use their reports as selling features. They need to explain to their clients what
these reports are for, and what their used for.
4. During the trial, Mary K. Cline, a senior auditor for Deloitte, Haskins and Sells stated: a. Should
the oversale of lifetime partnerships be classified as a subsequent event?
Yes the oversale of lifetime partnerships should be classified as a subsequent event because the audit
report was dual dated August 31,1984 and October 24,1984. Deloitte argued that the oversale
occurred shortly after the May 31,1984 fiscal year end. However since the audit report was dual
dated Deloitte had the opportunity to classify the oversale as a subsequent event, even though it was
after year end. b. Should Deloitte have evaluated the sales occurring after the balance sheet date of
May 31,1984?
Yes. Deloitte should have evaluated the sales occurring after the balance sheet date of May 31,1984.
Since Deloitte admitted that an oversale occurred shortly after the end of the fiscal year, it is their
responsibility to report on subsequent events that occurred after that date. c. Should L&H been
aware of the sales limits on lifetime memberships? If so, what should they have done about it?
Yes L&H should have been aware of the sales limits on lifetime

The Auditor 's Responsibility For Detecting Fraud
The main issue in this case is that in the standard audit reports that go with the financial statements,
"the auditor's responsibility for detecting fraud is not discussed (Mancino, 1997)". This is occurring
because "auditors do not examine every transaction that happens or event and that would mean there
is no guarantee that all material misstatements, whether caused by error or fraud could be detected
(Mancino, 1997)". There should be a spot on the audit report that states the auditor's roles and their
limitation into finding fraud. "There also seems to be some issues between the rules of the PCAOB
has and the language that auditors use in their reports do not match (Holl, 2005)". They should add a
phrase to their audit reports that says it was either caused by error or fraud and to take accountability
of knowing fraud had happen since it is the auditor's job to show that the financial statements are
free of material misstatements. Another reason this is occurring is the fact it is pretty much a pass or
fail type of report it is not very detailed.
The recommendation I would have for handling these issues are getting languages to match what the
auditors do and what the investors want to see when they're reading the auditor's report. We also
need to bring back that the auditor's reports and include the term "certify" as if they were to
guarantee that they have reviewed the financial statements with an external stamp of approval. "This
leaves it in the auditor's hands and

ch7 quiz questions and solutions
ch7
Student:
___________________________________________________________________________
1.
All companies must follow the guidelines of AS5.
True
2.
Most public companies must follow the guidelines of AS5.
True
3.
False
When auditing a public company, the auditor must form an opinion on the effectiveness of internal
control over financial reporting, or issue a disclaimer in the event of a scope limitation.
True
9.
False
The likelihood of an event is "more than remote" when it is "highly possible."
True
8.
False
The PCAOB makes it clear that the CEO and CFO are responsible for the internal control over
financial reporting and the preparation of the statements.

True
7.
False
Based on PCAOB guidelines, the audit of ICFR and ... Show more content on Helpwriting.net ...
Which of the following is not a primary objective of internal control as established by COSO?
A.
B.
C.
D.
Efficiency and effectiveness of operations
Effective purchasing systems
Compliance with laws and regulations
Reliable financial reporting
18. The main goal of auditing internal control is:
A. To allow the auditor to fix any internal control deficiencies
B. To form an opinion on the ability of internal controls to prevent fraud
C. To assure management that internal control is preventing all material misstatements on the
financial statements D. To evaluate the effectiveness of controls over all relevant financial statement
disclosures in the financial statements 19. An auditor performing an audit of internal control over
financial reporting would be required to:
A.
B.
C.
D.
Rely on the work of internal auditors
Test all of the entity's internal controls
Form an opinion on the effectiveness of internal control
Randomly identify accounts for an audit of internal control
20. In determining the extent to which the auditor may use the work of others in the audit of ICFR,
the auditor should do all of the following except
A.
B.
C.
D.
Test some of the work performed by others to evaluate the quality and effectiveness of their work
Evaluate the nature of the controls subjected to the work of others
Evaluate the competence and objectivity of the individuals who performed the work
All of the above are required

21.

Independence of External Auditor
Independence of external auditor By:– shubham kanchhal
Auditor independence refers to the independence of the auditor from parties that may have a
financial interest in business being audited. Independence requires integrity and an objective
approach for the audit process. This concept requires the auditor to carry his work freely and in an
objective manner. The purpose of an audit to enhance the credibility of a financial enhancements by
providing reasonable assurance from an independent source that present a true and fair view in
accordance with an accounting standard. This objective will not be met if users of the audit report
believe that ... Show more content on Helpwriting.net ...
There are three main ways in which the auditor's independence can manifest itself. Programming
independence is essentially protects the auditor's ability to select the most appropriate strategy to
conduct an audit. Auditors must be free to approach a piece of work in whatever manner they
consider best. As a client company grows and conducts new activities, the auditor's approach will
likely have to adapt the account for these. In addition, the auditing profession is a dynamic one, with
new techniques which is constantly being developed and upgraded which the auditor may decide to
use. The strategy methods which the auditors intend to implement cannot be inhibited in any way.
While programming independence protects auditors' ability to select an appropriate strategy,
investigative independence protects the auditor's ability to implement the strategy in whatever
manner they consider it necessary. Basically, auditors must have unlimited access to all company
information. Any queries regarding a company business and accounting treatment must be answered
by the company. The collection of audit evidence is an essential process, and cannot be restricted in
any way by Client Company. Reporting independence protects the auditors' ability to choose to
reveal to the public any information that they believe should be disclosed. If company directors have
been

American Fuel & Supply Company
American Fuel & Supply Company Inc.
1. A major focus of the lawsuit Chevron Chemical filed against Touche Ross was the auditing
profession's rules regarding the "subsequent discovery of facts existing at the date of the auditor's
report". Those rules distinguish between situations in which a client cooperates with the auditor in
making all necessary disclosures and situations involving uncooperative clients. Briefly summarize
the differing responsibilities that auditors have in those two sets of circumstances.
Answer:
International Standard of Auditing (ISA) Section 560 Subsequent Events paragraph 15 defined that
"Subsequent discovery of facts existing at the date of the auditor's report" is where the condition
when after the ... Show more content on Helpwriting.net ...
(Messier, Jr., W., Glover, S. M. & Prawitt, D. F. 2008) The opinion of the above author also
supported by ISA Section 560 paragraphs 18. It stated that when management does not take the
necessary steps to ensure that anyone in receipt of the previously issued financial statements
together with the auditor's report thereon is informed of the situation and does not revise the
financial statements in circumstances where the auditor believes they need to be revised, the auditor
would notify those charged with governance of the entity that action will be taken by the auditor to
prevent future reliance on the auditor's report. The action taken will depend on the auditor's legal
rights and obligations and recommendations of the auditor's lawyers.
2. Given your previous answer, do you believe that Touche Ross complied with the applicable
professional standards after learning of the error in AFS's 1985 financial statements? Explain.
Answer:
Based on the previous answer, I believed that Touche Ross did not comply with the applicable
professional standards which are International Standard of Auditing (ISA) 560. When the personnel
of Touche Ross discovered that the AFS's 1985 financial statements contained a material
misstatement, they attempted to persuade AFS to recall the company's 1985 financial statements.
But, unfortunately AFS officials declined to recall those financial statements. At last, AFS and
Touch Ross come

Essay on Example Auditing Case
Example auditing case
1)" Based on the information given in this case and your knowledge of auditor's reports, identify the
deficiencies in the draft of the proposed report. Do not redraft the report, but provide justification or
explanation for each of the deficiencies you identify" (Pany, Auditor's Report, 2010).
A. In the Introduction paragraph it states "As discussed in Note K to the financial statements, the
Company has properly disclosed a subsequent event dated March 14, 20x9" (Pany, Auditor's Report,
2010). This does not belong in this section of the report; it belongs below the scope paragraph. The
introduction paragraph is to "clarify the responsibilities of management and the auditors" (Pany,
Professional Standards, 2010).
B. ... Show more content on Helpwriting.net ...
Further, the company does not provide for income taxes with respect to the differences between
financial income and taxable income arising because of the use, for income tax purposes, of the
installment method of reporting gross profit from certain types of sales. " (Pany, Auditor's Report,
2010). This statement belongs below the scope paragraph. This statement should also be broken
down into two different notes relating to the financial statements because they refer to two different
areas of the statements.
F. At the bottom of this report it states, "We believe that these appraisal values are reasonable"
(Pany, Auditor's Report, 2010). This does not belong here because they do not want your opinion in
this area.
2) "Explain how you would correct each of the deficiencies you identified in requirement 1" (Pany,
Auditor's Report, 2010). Refer back to question 1 the errors found in the report.
A. I would omit this statement and place it below the scope paragraph of the report
B. I would omit this statement completely.
C. I would replace the statement with the following statement: Because of the effects of the matters
discussed in the preceding paragraph, the financial statements referred to above are not fairly
presented in all material respects
D. I would omit this statement completely.
E. These statements need to be placed below the scope paragraph and broke down into two different
notes referring

Essay On Auditing
Introduction:
The collapse of small or large organizations in recent years; such as Enron Energy has renewed
interest regarding the issue pertaining to fraudulent financial reports, henceforth the conscious
publication of misleading financial information by management to stakeholders. This interest
sparked debates that highlighted the importance of proper reporting and the role that must be
fulfilled by auditors which is yet to be comprehensively determined and agreed upon by industry
leaders, regulators and governments however according PCAOB Chairman « detecting fraud is the
responsibility of external auditors and that with few exceptions they should find it »(CFO.com
2004).
In deed the responsibility of auditors is being argued ... Show more content on Helpwriting.net ...
The change is due to the increase of the size of firms and the volume of transactions, the
responsibility of fraud detection was transferred to the management henceforth–internal control.
In the 80's and because of the technology advancement, the case law declared that in some situations
auditors have the duty to detect fraud.
After the Enron debacle the responsibility of auditors shifted more towards fraud detection as the
scandal highlighted the lack in auditing process with regards to fraud prevention since auditors were
partaking in the fabrication and falsification of accounting statement. Thus auditors legitimized the
falsified financial statement whether through inaptitude to properly conduct their work or conflict of
interest between management and auditors. To sum this view it is important to keep in mind that
researching misrepresentation within financial statement only became recently part of the auditor's
legal obligation.
In a recent research paper, the reason why auditors fail to detect fraud has been highlighted and
exposed through research–based methods, by exposing all factor types of auditing failures (Asare,
Wright and Zimmerman 2014, JFIA).
Many causes were revealed by the aforementioned study, primarily, the failure to detect fraud could
be due to the audit process. Hence, the methodology used in conducting audit missions have been
rarely modified and upgraded

Keystone Case Study
Good morning, your Honor. I am Theresa Pacholik and I am representing Group One. Please let me
should uphold the decision of the district court against Grant Thornton, LLP. We will discuss the
negligent actions performed during the audit conducted by Grant Thornton and how their unsafe and
unsound practices impacted Keystone Banks' regulators, shareholders and the public.
Background. Grant Thornton LLP vs. FDIC, took place in West Virginia District Court in 2004. We
are here today as a result of the appealed filed by Grant Thornton. In asserting for the OCC, ... Show
more content on Helpwriting.net ...
GAAS requires an auditor to write a report to express an opinion in regards to the financial
statements, taken as a whole, or notate that an opinion cannot be expressed based on the facts given
(Generally Accounting Auditing Standards, 2016). When the auditor is unable to express an overall
opinion, the auditor should list the reasons why in the auditor's report. When an auditor's name is
associated with financial statements, the auditor should clearly indicate the character of the auditor's
work, if any, and the degree of responsibility the auditor is taken, in the auditor's report. ("Generally
Accepted Accounting Principles," n.d.). In 1999, Grant Thornton issued an unqualified audit
opinion. Grant Thornton acknowledged the firm's duty to "obtain reasonable assurance about
whether the bank's financial statements are free of material misstatement" and the opinion stated that
the firm had found such assurance (Grant Thornton LLP v. the OCC, 2008). The auditor's opinion
should provide reasonable assurance that the financial statements presented are fair in all aspects.
The audit's opinion does not have to have absolute assurance, however, it should give a fair view to
follow the financial reporting framework (Auditor's Report–What is an auditor's report?, 2015). The
unqualified audit opinion raised many questions with our client because for many years, our client,
OCC, had cited Keystone Bank with many

Berkshire Hathaway
ISSUES
Warren Buffet invoked the substance–over–form concept to justify accounting for the GEICO and
General Foods transactions as dividends distributions rather than sales of stock. Do you agree with
Buffet that the substance of each of the proportionate redemptions was a dividend and not a sale of
stock?
In deciding how to account for an unusual or unique transaction for financial reporting purposes,
should one consider the tax treatment applied to the transaction?
Did Peat Marwick have a right to change its position on the proper accounting treatment for the
stock redemptions? What factor or factors may have been responsible for Peat Marwick's decision to
change its position regarding these transactions?
FACTS
In 1983, GEICO ... Show more content on Helpwriting.net ...
When asked to comment on Buffet's criticism of Peat Marwick in his company's 1984 annual report,
a Peat Marwick partner simply noted, "It's the client's prerogative to disagree. Our report speaks for
itself." Another prerogative of an audit client is to change auditors. In 1985, Berkshire retained
Touche Ross & Company to audit its financial statements. As required by the Securities and
Exchange Commission, Berkshire filed an 8–K statement with that federal agency to disclose the
change in auditors. In that statement, Berkshire reported it was "dissatisfied" with Peat Marwick's
inconsistency regarding the proper accounting treatment for stock redemptions.
AUTHORITY/ANALYSIS
The substance over form accounting concept means that the economic substance of transactions and
events must be recorded in the financial statements rather than just their legal form in order to
present a true and fair view of the affairs of the entity. Preparers of the financial statements should
use their judgment when employing the substance over form concept, which helps to derive the
business sense from the transactions and events and to present them in a manner that best reflects
their true essence. In some instances the legal aspects of transactions and events may have to be
disregarded in order to provide more useful and relevant information to the users of financial
statements. The concept of

Evulation of Audit Tenure, Industry Specialization, and...
The objective of this study is to evaluate audit tenure, industry specialization, and firm size and its
correlation to financial restatements. A client's restatements suggest low audit quality because it
indicates that the client's financial statements are not in line with GAAP. I analyzed a sample of 250
firm–year restatements from public companies during 2008 to 2012. I gathered the data using
COMPUSTAT and AuditAnalytics. For my results, I have found that auditor tenure has a negative
correlation with financial restatement. I also found that industry expertise has a negative correlation
with financial restatements. Further, it appears that firm size has no correlation with financial
restatements. In conclusion, it turns out my ... Show more content on Helpwriting.net ...
Agreeing with Davis, Myers, Rigsby, and Boone (2007) findings suggest that the longer the audit
tenure is, the audit quality tends to be higher. Regarding prior research literature regarding industry
specialization and financial restatements, Owhoso (2002) and Solomon (1999) findings suggest the
relationship between industry specialization and the increase of audit quality. Finally, prior research
literature regarding firm size and financial restatements show that Boone (2007) findings indicate a
positive correlation between the two factors.
My research is different from the prior studies in the fact that the studies do not include earnings per
share and return on assets in their testing. I believe both variables measure a firm's profitability and
its ability to generate cash. These two indicators allow for my results to indicate whether a firm's
financial statements are doing well and have not been restated based on the experimental variables. I
believe that my findings have proved empirical evidence that longer auditor tenure and industry
specialization are negatively associated with low audit quality. As for firm size, there is currently no
correlation with low audit quality
Audits are meant to contribute to a company's financials by bringing assurance that they are in
accordance with GAAP. Auditors provide high quality audit opinions on a client and one

The Importance Of Duty Of Care
Duty of care is the legal obligation of person or organization to take reasonable care and measures to
avoid any behaviours or omissions that could foreseeably harm others. Originally, foreseeability is
the element appeared to be the sole determinant of duty of care and it was developed by the
'neighbour' principle – Donoghue v Stevenson. However, currently three–stage approach from
Caparo Industries plc v Dickman is the latest test, which consist of foresight, proximity as well as
fair and reasonable. Donoghue v Stevenson is one of the famous case in English law which shows
that the existence of a duty of care. On August 26 1928, Mrs Donoghue severed gastroenteritis due
to the consumption of about half of the beer made by Stevenson that contained decomposed remains
of a snail in the bottle by accident. However, Mrs Donoghue was not able to claim through breach of
warranty of a contract due to she was not privy to any contract. This case was then delivered by
Lord Atkin in year 1932, where established that Stevenson should be responsible for the well–being
of individuals who consume his products. This case produced controversial 'neighbour principle',
which extended the tort of negligence beyond the tortfeasor and the immediate party. An English tort
law case on pure economic loss resulting from negligent misstatement, Hedley Byrne & Co Ltd v
Heller & Partners Ltd. Hedley wanted to check their customer, Easipower's financial position and
therefore asked for a credit

Key Audit Matters (KAM)
To enhance the perceived value of financial report audits, the IAASB has set out the public issuance
of Key Audit Matters (KAM) or audit commentaries in the Proposed New Audit Report. Although
some investors have expressed receptiveness to this proposal, reactions from auditors and their
clients have been mixed. I personally believe that there are merits to the disclosure of KAM given
the auditor's strong understanding of the entity's business, however it is debatable whether the
benefits outweigh the costs of auditors potentially overstepping independence requirements and
clients risking to face increased audit fees.
By highlighting matters considered most important to users and drawing attention to management's
disclosures, auditor commentaries can provide a more enhanced communicative value than the
current "pass/fail" opinion system. Disclosures on KAM could send a signal to users that these
matters should be important to their decision–making because these were the subjects of significant
audit attention (Ernst and Young, 2012). Furthermore, it helps readers understand how the audit was
conducted and provides additional contextual information on how the auditor reached their
conclusions (ICAO, 2012). By virtue of users more closely reviewing these disclosures, auditors
may also practice greater professional scepticism, leading to improved audit quality and
transparency.
In contrast, inclusion of KAM may go beyond the audit scope. Commenting on entity specific

The Audit Report Was Timely, but at What Cost?
CHAPTER AUDIT REPORTS THE AUDIT REPORT WAS TIMELY, BUT AT WHAT COST? 3
LEARNING OBJECTIVES After studying this chapter, you should be able to 3–1 Describe the
parts of the standard unqualified audit report. Specify the conditions required to issue the standard
unqualified audit report. Understand combined reporting on financial statements and internal control
over financial reporting under Section 404 of the Sarbanes–Oxley Act. Describe the five
circumstances when an unqualified report with an explanatory paragraph or modified wording is
appropriate. Identify the types of audit reports that can be issued when an unqualified opinion is not
justified. Explain how materiality affects audit reporting decisions. Draft appropriately modified
audit ... Show more content on Helpwriting.net ...
The audit report is the final step in the entire audit process. The reason for studying it now is to
permit reference to different audit reports as evidence accumulation is studied throughout this text.
These evidence concepts are more meaningful after you understand the form and content of the final
product of the audit. We begin by describing the content of the standard auditor's report.
STANDARD UNQUALIFIED AUDIT REPORT To enable users to understand the language of
audit reports, AICPA professional standards provide uniform wording for the auditor's report, as
illustrated in the auditor's standard unqualified audit report in Figure 3–1. Different auditors may
alter the wording or presentation slightly, but the meaning will be the same. Parts of Standard
Unqualified Audit Report OBJECTIVE 3–1 Describe the parts of the standard unqualified audit
report. The auditor's standard unqualified audit report contains seven distinct parts, and these are
labeled in bold letters in the margin beside Figure 3–1. 1. Report title. Auditing standards require
that the report be titled and that the title include the word independent. For example, appropriate
titles would be "independent auditor's report," "report of independent auditor," or "independent
accountant's opinion." The requirement that the title include the word independent is intended to
convey to users that the audit was unbiased in all aspects. 2. Audit

Audit: Auditing and Financial Report
CHAPTER 1
REVIEW QUESTIONS
1.2What qualities must an 'assurer' have in order for you to feel that their statement has high
credibility?
An assurer must have the knowledge and expertise to assess the truth and fairness of the information
being presented by the preparers. Auditors of financial reports need to be trained accountants with
detailed knowledge about the complex technical accounting and disclosure issues required to assess
the choices made by the financial report preparers. When undertaking an audit, the auditor should
use professional scepticism, professional judgement and due care.
Auditors should be independent of the client. Independent auditors have no incentives to aid the
entity in presenting their results ... Show more content on Helpwriting.net ...
The emphasis of matter paragraph is included in the audit report immediately after the opinion
paragraph.
An emphasis of matter paragraph draws the attention of the reader to an issue that the auditor
believes has been adequately and accurately explained in a note to the financial report. The purpose
of the paragraph is to ensure that the reader pays appropriate attention to the issue when reading the
financial report. The audit report remains unqualified and the user of the financial report can still
rely on the information contained in the financial report (ASA 706; ISA 706).
The emphasis of matter paragraph is not used when the entity has not disclosed the issue in its
report. The auditor can use an 'other matter' paragraph to introduce another matter that the auditor
believes should be disclosed.
The usual circumstance which would warrant an Emphasis of Matter paragraph in the auditor's
report is the existence of a significant uncertainty, the resolution of which may materially affect the
financial report.
From ASA 706:
A1. Examples of circumstances where the auditor may consider it necessary to include an Emphasis
of Matter paragraph are:

– An uncertainty relating to the future outcome of exceptional litigation or regulatory action.
– Early application (where permitted) of a new accounting standard (for example, a new Australian
Accounting Standard) that has a pervasive effect on the financial report in advance of

Auditing & Assurance Services
AC 4342 Auditing
Introduction to assurance and financial statement auditing
Discussion Question: Messier Q1–13, 14
1
References
HKICPA Members' Handbook
Amended Preface to the Hong Kong Quality Control, Auditing, Review, Other Assurance, and
Related Services Pronouncements Hong Kong Framework for Assurance Engagements
Reference
Messier: Ch 1
2
CILOs and TLAs
CILOs
1 Describe the auditing profession, the regulatory, legal and reporting framework of auditing.
Recognize the basic principles, objectives and ethical requirements of audit and assurance services.
Identify the audit process from client acceptance, design of audit procedures and express an
appropriate audit conclusion based on the audit evidence obtained. ... Show more content on
Helpwriting.net ...
Reliability – Can the information be relied upon to signal the true state of the specific assertion
being tested?
14
Summary of management assertions by category
Classes of transactions & events for the period under audit Account balances at period end
Presentation and disclosures
Occurrence /Existence Rights and obligations Completeness Accuracy / Valuation and allocation
Cutoff Classification
Transactions and events that have been recorded have occurred and pertain to the entity.

Assets, liabilities, and equity interests exist.
Disclosed events, transactions, and other matters have occurred and pertain to the entity.
(Occurrence and rights and obligations)
The entity holds or controls the rights to assets, and liabilities are the obligations of the entity. All
transactions and events that should have been recorded have been recorded. Amounts and other data
relating to recorded transactions and events have been recorded appropriately. All assets, liabilities
and equity interests that should have been recorded have been recorded. Assets, liabilities, and
equity interests are included in the financial statements at appropriate amounts and any resulting
valuation or allocation adjustments are appropriately recorded. All disclosures that should have been
included in the financial statements have been included. (Completeness) Financial and other
information are disclosed fairly and at appropriate amounts. (Accuracy and Valuation)
Transactions and

Case Grant Thornton Llp V. Fice Of Controller Of Currency
Defendant's Position in the case Grant Thornton LLP v. the Office of Controller of Currency Good
morning, your Honor. I am Theresa Pacholik and I am representing Group One. Please let me
should uphold the decision of the district court against Grant Thornton LLP (Grant Thornton). We
will discuss the negligent actions performed during the audit conducted by Grant Thornton and how
their unsafe and unsound practices impacted First National Bank of Keystone (Keystone Bank)
regulators, shareholders and the public.
Background. Grant Thornton LLP v. FDIC, took place in West Virginia District Court in 2004. We
are here today as a result of the appeal filed by Grant Thornton. In asserting for the OCC, we will
prove why Grant Thornton is responsible for not acting in accordance with the laws and regulations
designed for independent financial institutions while conducting an audit for the First National Bank
of Keystone. The OCC is an independent bureau of the U.S. Department of Treasury that is
responsible for supervising all national banks and federal savings associations, including federal
branches and agencies of foreign banks (Office of the Comptroller of the Currency, 2015). The First
National Bank of Keystone was incorporated in 1904 in Keystone, West Virginia. Keystone Bank
was a member of

What Is The Greatest Challenge An Auditor Faces?
What is the greatest challenge an auditor faces?
Individual auditors often differ in the aspects of the career field that each considers extremely
problematic. Interestingly, the reasons that auditors give for these dislikes fluctuate depending upon
the level of education, experience, and in rare cases the weather on the day the individual was asked
for his/her view on troublesome areas of the profession. Certainly, this is not uncommon in
comparison with similar or related accounting and auditing career fields, in fact this is a common
result amongst all professions. Incidentally, the same group of people had numerous aspects found
to be favorable in the field which warranted further research on the subject matter and expanded the
demographic to include accounting students. Although the majority of students feel the toughest
challenge an auditor faces is the responsibility of issuing a report; alternately the crucial challenges
for an auditor are the liabilities, and presentation of the opinions.
Reports an auditor can issue. Initially, defining the five types of reports an auditor has the option of
issuing should assist in the comprehension of the severity of the tasks. Namely, the five are the
unqualified or unmodified, modified, qualified, adverse opinion, and disclaimer reports; the
definitions follow. (1) Unqualified/unmodified audit reports are defined as "clean audit reports,
indicating the auditor's opinion that a client's financial statements are fairly presented

Audit Engagement Checklist
Print Form
00–1 2009
General Audit Engagement Checklist
20,401
Section 20,400 General Audit Engagement Checklist
Checklist for Review of Audit Engagements Contents
Section I. The Auditor's Report With Regard to the Auditor's
Report............................................................................................... II. General Audit Procedures
With Regard to Client Acceptance ..................................................................................................
With Regard to Client Understanding .............................................................................................
With Regard to Audit Planning ... Show more content on Helpwriting.net ...
Liabilities.........................................................................................................................................
Deferred Credits ..............................................................................................................................
Income Taxes ..................................................................................................................................
Commitments and Contingencies....................................................................................................
Capital Accounts .............................................................................................................................
Revenue...........................................................................................................................................
Expenses..........................................................................................................................................
Business Combinations and Consolidations....................................................................................
Other................................................................................................................................................
AICPA Peer Review Program Manual
Page 20,407 20,409 20,409 20,410 20,411 20,411 20,412 20,413 20,413 20,413 20,414 20,414
20,415 20,415 20,415 20,416 20,416 20,417 20,417 20,418 20,418 20,419 20,421

ACCA Paper F8 Slides
ACCA COURSE NOTES June 2014 Examinations Paper F8 Audit and Assurance
(INTERNATIONAL) Please spread the word about OpenTuition, so that all ACCA students can
benefit. ONLY with your support can the site exist and continue to provide free study materials!
OpenTuition Course Notes can be downloaded FREE from http://opentuition.com Copyright
belongs to OpenTuition.com – please do not support piracy by downloading from other websites.
Visit opentuition.com for the latest updates, watch free video lectures and get free tutor support on
the forums To fully benefit from these notes please watch the free ACCA Lectures on the
OpenTuition website Free ACCA resources by Paper (free course notes / lectures / revision lectures /
tests / ... Show more content on Helpwriting.net ...
Without the frame of reference provided by suitable criteria, any conclusion is open to individual
interpretation and misunderstanding. Examples: Financial Statements: IFRS Internal Control: an
internal control framework. Compliance: the applicable law, regulation or contract. They must be
available to intended users 9 For latest course notes, free audio & video lectures, support and forums
please visit Click Suitable to edit criteria Master title style Suitable criteria exhibit the following
characteristics: Relevance: contribute to conclusions that assist decision–making by the intended
users. Completeness: include all relevant factors that could affect the conclusions. Reliability: allow
reasonably consistent evaluation of the subject matter. Neutrality: so that conclusions that are free
from bias. Understandability: to allow conclusions that are clear, comprehensive, and not subject to
significantly different interpretations. 10 Click to edit Master title style Evidence Professional
scepticism Sufficient, appropriate evidence Sufficiency = quantity of evidence. Appropriateness =
quality of evidence (relevance and its reliability) 11 Click to editreport Assurance Master title style
A written report containing a conclusion. Positive form (reasonable assurance engagement): "In our
opinion internal control is effective, in all material

Acc 403
[pic]
|Auditing – ACC 403 |
|Student Course Guide |
|Prerequisite: ACC 304 |
| | |
|INSTRUCTIONAL MATERIAL – Required |
|Arens, A., ... Show more content on Helpwriting.net ...
|
|Use technology and information resources to research issues in auditing. |
|COURSE EXPECTATIONS |
| |
|To obtain the most benefit from this class: |
|Follow Strayer University's policies and procedures as well as those specific to this class. |
|Class specific information can be found within the "Class Information" section within the Student
Center. |
|WEEKLY COURSE SCHEDULE |
| |
|The weekly schedule describes the learning activities that will help you achieve the

Ernst & Young was the auditing firm of HealthSouth from...
Ernst & Young was the auditing firm of HealthSouth from 1984 to 2002. Due to financial hardship
Healthshore grew desperate and developed a scheme to deceive not only shareholders but Ernst and
Young. Inevitably whistleblowers came forth and a lawsuit ensued. The shareholder's lawsuit against
Ernst and Young never went to trial. However, the lawsuit against Healthshore ended in settlement.
Though a travesty to the shareholders and employees not involved with the fraud, this fraudulent
activity was necessary for it forced the SEC to hinder these types of events to occur in the future.
There may still be cases similar to HealthShore going on today had it not been for the Sarbanes
Oxley act enforcing stricter requirements for auditing firms. ... Show more content on
Helpwriting.net ...
Scienter of statements would indicate either the auditor purposefully deceived information or made
reckless decision when issuing an opinion which in both cases would qualify as an audit failure. If
Ernst and Young made any untrue statements concerning material facts or omitted necessary facts on
opinion this would classify as a violation of Rule 10b–5.
3a.) In 1998, an angry shareholder who described themselves as "fleeced shareholder" had e–mailed
auditors and financial regulators questioning how HealthSouth was cooking their books. It is the
date and detail in the e–mail that proves the most frightening. The e–mail displays that the fraud
should have been caught long before it was uncovered. Unlike most investors, it was evident that
this person had a background in accounting and raised legitimate concerns. Ernst & Young admitted
to receiving this email in November of 1998. However, Ernst & Young felt the questions raised by
the anonymous writer did not affect the presentation of the financial statements. Moreover, a former
bookkeeper of HealthSouth, Michael Vines, also e–mailed Ernst & Young about specific area of
fraud. His background qualified for his email to be considered worthy evidence. Nevertheless, Ernst
& Young claimed that the accounting practices being question were

The Auditor‚Äôs Responsibility to Consider Fraud and Error...
The Auditor's Responsibility to Consider Fraud and Error in an Audit of Financial Statements.
The Accounting and Auditing Organization for Islamic Financial Institutions established on Safar 1,
1410 Hijri (February 26, 1990) at Algiers and registered in Bahrain on Ramadan 11, 1411 Hijri
(March 27, 1991) has so far (April, 2004) set the following Financial Accounting Standards,
Auditing Standards, Governance Standards & Code of Ethics for Accountants & Auditors of Islamic
Financial Institutions:
□ Financial Accounting Standard:
FAS Number Title
1. General Presentation and Disclosure in the Financial Statements of Islamic Banks and Financial
Institututions
2. Murabaha and Murabaha to the Purchase Orderer
3. Mudaraba Financing ... Show more content on Helpwriting.net ...
Definition and cases of fraud
5. Fraud refers to an intentional act by one or more individuals among management, those charged
with governance, employees, or third parties, involving the use of deception to obtain an unjust or
illegal advantage, such as:
(a) Breach of contracts between the IFI, investors and other third parties such as the
misappropriation of funds of investment account holders in the case of Islamic Banks, and
policyholders in the case of Islamic Insurance companies (referred to hereafter as IAH and PA,
respectively);
(b) Intentional misallocation of profits between the IFI and IAH/PA;
(c) IFI's misuse of IAH and PA funds including violation of contracts;
(d) Intentional non disclosure by management of some activities and relevant information to the
IFI's Shari'a supervisory board, auditors, investors and shareholders;
(e) Intentional, consistent violation and misinterpretation of AAOIFI Shari'a standards and the

Auditing: Financial Audit and Auditors Reports Date
PRINCIPLES OF AUDITING Course: Auditing Title: Auditing Operations and Completing the
Audit, Auditors' Reports Date: March 25, 2014 Justin Kealey, CPA, is auditing Tustin Companies,
Inc. Kealey has accumulated known and likely misstatements for the current year to evaluate
whether there is a sufficiently low risk of material misstatement of the financial statements to issue
an opinion. However, Kealey notes that there are several misstatements that have been carried over
from prior years. A .Distinguish between the iron curtain and the rollover approaches to considering
the misstatements from prior years. In consideration of an auditor's approach for considering the
effects of misstatements from ... Show more content on Helpwriting.net ...
a. Discuss types of information that may indicate substantial doubt about a client's ability to remain
a going concern. Circumstances presenting doubt in the client's ability to achieve and maintain
business performance begin with working capital deficiencies. More problems for concern may be
recurring operating lost, arrears in dividend, defaulting on loans and adverse financial ratios. The
economy can cause business lost as loosing principal customers, work stoppages, legal problems,
and inside staff members affecting the business meeting its standards. b. Explain the auditors'
obligation in such situations. Information contradictory to an assumption that a CPA firm's client
remains a growing concern is generally relates to the company's ability to satisfy its financial
commitments For each of the following brief scenarios, assume that you are reporting on a client's
financial statements. Reply as to the type(s) of opinion possible for the scenario. In addition: Unless
stated otherwise, assume the matter involved is material. Thomas Bros. Construction is involved in a
hazardous trade on a work project and has obtained insurance coverage related to the hazard.
Although the probability is remote, a material portion of the company's assets could be destroyed by
a serious work related accident. A standard unqualified report is issued. If

The Integration Of The Gaas
The integration of the GAAS, the AICPA, the PCAOB and the IAS
Background Information
The Generally Accepted Auditing Standards refers to standards that are used to audit Private
Corporations (Sunder, 2010 P. 100). The standards are divided into three categories. The categories
include; fieldwork standards, reporting standards as well as general standards. The general standards
address the individual's qualifications to become an auditor as well as the minimum standards for
the work product. According these standards, an auditor must have adequate proficiency and
training, must be independent in appearance and facts and must have the ability to exercise the
necessary professional care while performing the auditing tasks (Hail, Leuz & ... Show more content
on Helpwriting.net ...
Additionally, the reporting standards require the auditor to give his opinion on whether the
statements present all materials of the business under audit.
The Public Company Accounting Oversight Board refers to a nonprofit corporation that was
established congress to supervise the audit process of public companies so as to protect the public
and the investors' interest by enhancing independent, accurate and informative audit reports
(DeFond, 2010, P. 105). The board also supervises the audits of dealers and brokers including
reports on compliance that are filed according to the federal laws on securities so as to enhance the
protection of investors. The Act that created the Public Company Accounting Oversight Board
requires that all auditors of the United States companies are subjected to independent and external
supervision. Initially, the performance of the PCAOB was self–regulated. The board comprises five
members that are appointed for a term of five years by the Securities Exchange Commission
(Daugherty & Tervo 2010, p. 200).. The Securities Exchange Commission has the supervisory
power over the Public Company Accounting Oversight Board including the endorsement of the
board's budget, standards as well as rules. The Public Company Accounting Oversight Board I s
funded through the yearly accounting support fee

What Is The Role Of Professional Skepticism In Auditing...
Question1: What is the role of professional skepticism in auditing financial statements? Do you
think that the auditors were skeptical enough in evaluating the operations of Imperial Valley?
Explain. Professional skepticism in auditing financial statement involves the auditor having the
necessary skill set and attitude that includes a questioning mind, making a critical assessment of the
audit evidence, careful observation and looking beyond the obvious, being diligent, alert, persistent
and courageous paying close attention to situations which may involve misstatement due to fraud.
Professional skepticism is critical in an audit because it facilitates professional judgment and it also
provides the evidence that the audit was planned and performed in accordance with generally
accepted auditing standards (Mintz & Morris, 2014). The role of professional skepticism in auditing
financial statements is to facilitate professional judgment regarding decisions including:
– The nature, timing, and extent of the audit procedures to perform to reduce the risk of material
misstatements to an appropriate level,
– Whether ... Show more content on Helpwriting.net ...
For example, the auditors did perform the audit and documented their findings, yet did not challenge
management to obtain supporting evidence with regards to the loan collateral, the collectability of
loans, and weakness in internal controls. Furthermore, with regards to the weakness in internal
controls, the auditors were concerned, made recommendations yet were unable to give voice to
values and influence management. For instance, management argued that the five percent reserve for
loan losses that was proposed by the auditors was too high and was able to convince them to agree
to a two percent loan

The Ethics Codes Of Uk
2
It's trust–worthy and reliable to have independent and unbiased auditors confirm that an
organization's claims about its financial position and the process behind these claims are true and
independent. The most important element for the audit report and opinion should be free bias. In
order to achieve this goal, auditors need to be objective. Auditor, as one part of the professional
accountancy bodies, is required to obey the ethics codes, which ensure the auditor to be
independent.
Furthermore, the ethics codes of UK utilize a principle–based framework approach to outline the
circumstances and assess whether the appropriate safeguard can be carried out to mitigate the threats
in order to achieve acceptable level of independence. ... Show more content on Helpwriting.net ...
However, when the threats are unable to eliminate, the auditor should not carry on reporting auditor
opinions.
The ethics codes also provide categories of threats of independence. The first one is self–interest
threat. This occurs when there is a conflicting between the auditor's financial or other self–interest
and the clients'. The financial or other interest will inappropriately influence the professional
auditor's judgment or behavior. For instance, if the auditor has close business relationship with the
audit client, that is a self–interest threat. Furthermore, a potential engagement with an audit client
and contingent fees relating to audit engagement are also the examples of self–interest threat.
The second one is called the self–review threat. This threat occurs when there are previous
judgments or products made by other audit or non–audit organizations. Then the auditor needs to re–
evaluate it to issue a new audit opinion. Furthermore, the self–review threat also occurs when the
auditor were previously a member of the auditor's client who made influence over subject matter of
the audit report. Then, self–review thread includes preparation of original data used to generate
financial statements or preparation of other records that are the subject matter of the audit
engagement as well. In the question, Transval Ltd requires the auditor to assist with the preparation
of both the company's corporation tax return and the director's personal tax

The Audit Expectation Gap Analysis
The audit expectation gap
The meaning of the expectation gap involves argument concerning the contradictory meaning of
what an audit is to user of financial statement, the public and the audit profession. Expectation gap
is the difference between what the public assumes to be the role of audit and what the audit
profession claim their role is in carrying out the audit function. . All the theories above describe the
expectations the stakeholders have of the auditors, including protection against fraud, warning of
future insolvency, general re–assurance of financial well–being, safeguards for auditor independence
and understanding of audit reports. Although these expectations seem to be rather natural, however,
an audit expectations gap does exist based mostly on the diversity of views about the audit function.
The gap exists between what the public expects the auditor to do and what the auditor can and
should do. Several suggestions were made to narrow the expectations gap, as well as providing
statutes in order to describe audit functions especially concerning the responsibility to detect and
report errors and fraud.
Component of audit expectation gap
Reporters have credited the expectations gap to mean that users of financial statement are confused,
ignorant or lack education. Porter in his analyses divided the expectation gap into three different
component which includes a) sub–standard performance b) deficient standards and c) unreasonable
expectations. a) The

The Roles Of Auditing And Assurance Services
Introduction
The role accounting firms played in the last financial crisis raised questions about the legitimacy of
auditing and assurance services. Auditors, who are considered independent and are supposed to
provide reliable information to financial statement users, played a major part in the financial
institutions' crisis. The role of auditing is not to stop management from making poor business
decisions, but it is to make sure that those decisions are properly disclosed (Rapoport, 2010).
However, auditors failed to fulfill that role while auditing some of the largest financial institutions,
which led to a huge financial meltdown during the first decade of the 21st Century. As a result of the
financial crisis, questions regarding the ... Show more content on Helpwriting.net ...
However, it is important to assure a greater independence and objectivity that offset the cost of
switching. One example where auditors' independence raised question is when the Ernest &Young
auditors allowed Lehman Brothers to use the off–balance sheet financing method to hide its
leverage. Ernest & Young helped Lehman Brothers, a company they audited for many years, to
mislead investors about the company's financial position which eventually led to its collapse.
Audit Deficiencies
External auditors could have prevented the collapse of large financial institutions by being more
skeptical and exercising professional due care while servicing their clients. In many cases, auditors
failed to obtain sufficient evidence supporting key assumption of management asset valuations, asset
ownerships or the use of accounting estimates. Ernst & Young failed to exercise professional due
care while auditing Lehman Brothers.
Lehman Brothers used Repo 105 transactions that a British law firm approved for them to make its
balance sheet look better and Ernst & Young agreed to the accounting management applied to these
transactions without actually examining any of the Repo 105 transactions. According to Tracy
Coenen (2010), Ernst and Young didn't even check the impact of these transactions on Lehman
financial statements, whether they are material to their balance sheet and therefore did

United States Surgical Corporation
United States Surgical Corporation
Prepared by
Alex Gonzalez & Daniella Trinchet
for
Professor C.E. Reese
in partial fulfillment of the requirements for
ACC 540 – Fraud Examination
School of Business / Graduate Studies
St. Thomas University
Miami Gardens, Fla.
Term A7 / Fall, 2014
October 24th, 2014
Table of Contents Issues 1 Facts 2 Analysis 5 Conclusions/Recommendation 12
References/Bibliography 14
Issues
1. What audit procedures that, if employed by Ernst & Whinney during the 1981 USSC audit,
might have detected the overstatement of the leased and loaned assets account that resulted from the
improper accounting for asset retirements?
2a. For USSC to extend the ... Show more content on Helpwriting.net ...
6. When a CPA firm has two audit clients that transact business with each other should the two audit
teams be allowed to share information regarding their clients? Facts United States Surgical
Corporation (USSC) was founded by Leon Hirsch in 1964 with very little capital, four employees

and one product. The one product was an unwieldy mechanical device that he intended to market as
a surgical stapler. Hirsch had already tried several lines of business and each had little success.
Hirsch made USSC into a large and profitable public company traded in the national exchange. His
surgical stapler revolutionized surgery techniques in the United States and abroad. Hirsch was the
dominate company in the small surgical stapling industry but in the 1980's was losing market share
from competing companies domestic and foreign. Hirsch's main competitor at the time was a
company owned by Alan Blackman. Blackman's company sold its products primarily in foreign
countries but was attempting to significantly expand in the U.S. Blackman and Hirsch were former
friends and Hirsch states that Blackman has infringed on USSC's patents by reverse engineering the
company's products. In 1980's, USSC began an aggressive counterattack to repel Blackman's
instruction into its markets. USSC adopted a worldwide litigation strategy to

The Assessment Of Significant Accounts
b) Our assessment of significant accounts
Misstatement in auditing is the difference among the amount, grouping, presentation or disclosure of
any reported financial statement element and the amount, grouping, presentation or disclosure
mandatory for the element to be in agreement with the pertinent financial reporting framework
(Moroney, Campbell, & Hamilton, 2014). Material misstatements can occur due to either fraud or
error (ACCA Global, 2014). The auditor ought to ascertain and evaluate the risks of material
misstatement right from the financial statement level and the assertion or declaration level (Arens,
Elder, & Beasley, 2013). The process involves first gaining an understanding of the organization and
its control procedures. ... Show more content on Helpwriting.net ...
A benefit is supposed to go hand in hand with the amount of input a person contributes to the
generation of profits. However, if by overstating these expenses allows for few individuals to siphon
cash from the company, this account needs proper audit measures to determine the level of material
misstatement in it. This happens in most expense accounts, therefore, necessitating an auditor to
request for proper proof of an expense incurred.
Thirdly, the property, plant and equipment of the company are vulnerable to material misstatement
for Tamawood limited. Being a construction company, some clients require that contractors own
substantial assets in order to qualify for tenders advertised. Malicious and greedy companies that do
not meet the set threshold may opt to overvalue their asset value. This is mainly concealed in
accounts such as property, plant, and equipment, which tend to have a substantial contribution to the
value of assets that a company owns. Auditors need to be keen on such accounts, note any sudden
increases in the value of assets, and require proof of any new purchases and/or disposal of such
assets. Thus, the account is vulnerable to be materially misstated and needs extra attention from
auditors.
The fourth account vulnerable to material misstatement is the provisions account. Items such as bad

Gleim Study Unit 4 Multiple Choice
After identifying a significant related party transaction outside the entity's normal course of
business, an auditor should
Evaluate the business purpose of the transaction.
In auditing related party transactions, an auditor ordinarily places primary emphasis on
The adequacy of the disclosure of the related party transactions.
Subsequent to issuing a report on audited financial statements, a CPA discovers that the accounts
receivable confirmation process omitted a number of accounts that are material, in the aggregate.
Which of the following actions should the CPA take immediately?
Perform alternative procedures to verify account balances.
An auditor might consider the procedures performed by the internal auditors because
They ... Show more content on Helpwriting.net ...
When a management's specialist has assumed full responsibility for taking the client's physical
inventory, reliance on the specialist's work is acceptable if
The auditor conducted the same audit tests and procedures as would have been applicable if the
client employees took the physical inventory.
When assessing an internal auditor's competence, an auditor ordinarily obtains information about all
of the following except
Access to information about related parties.
When assessing the internal auditors' competence, the auditor should obtain information about the
Educational background and professional certification of the internal auditors.
After an audit report is released, an auditor discovers that an important audit procedure was not
performed. Which of the following procedures is acceptable in this situation? No further action is
necessary if the audit report can still be supported.
Which of the following circumstances most likely would require an auditor to apply an omitted
procedure after the audit report issuance date? The auditor's report is unsupported as a result of the
omitted procedure. When assessing an internal auditor's objectivity, an auditor should
Top of Form Bottom of Form

Consider the organizational level to which the internal auditor reports.
Hill Corporation has hired Jones, a CPA, to audit its financial statements for year end. Jones, when
searching for related party transactions, should seek

Essay about Surfer Dude Duds, Inc
Surfer Dude Duds, Inc.
Case 12.4
Auditing II
ACG 4642–Spring 2011
By
Rick Woo
1. What are Mark's option?
Mark's option is to include an explanatory paragraph about Surfer Dude Duds, Inc.'s going concerns.
SAS 59 requires an auditor to evaluate conditions or events discovered during the engagement that
raise questions about the validity of the going–concern assumption. An auditor who concludes that
substantial doubt exists about the entity's ability to continue as a going concern and who is not
satisfied that management's plans are enough to mitigate these concerns is required to issue a
modified (but unqualified) report. It is also the duty for Mark to convince George about the financial
position of his company's going ... Show more content on Helpwriting.net ...
This frequently puts the auditor in the position, in effect, of deciding whether a company is able to
obtain the funds it needs to continue operating. Thus, the auditor's qualification tends to be a self–
fulfilling prophecy. The auditor's expression of uncertainty about the company's ability to continue
may contribute to making it a certainty.
The fear is that a going–concern opinion can hasten the demise of an already troubled company,
reduce a loan officer's willingness to grant a line of credit to that troubled company, or increase the
point spread that would be charged if a company was granted a loan. Auditors are placed at the
center of a moral and ethical dilemma: whether to issue a going–concern opinion and risk escalating
the financial distress of their client, or not issue a going–concern opinion and risk not informing
interested parties of the possible failure of the company. The hope is that issuing a going–concern
opinion might promote timelier rescue activity.
3. What potential implications arise for the accounting firm if they issue an unqualified report
without the going–concern explanatory paragraph?
It would be unethical to issue an unqualified report without the going concern report. This is because
every audit report must consist of the reasons for the unqualified report. An unqualified report is a
clean bill of health of the organization and

Auditors Rotation
Auditor Rotation | Raising Auditor 's Independence |
Proposed By: Varun Basantani |
Auditor Rotation– Raising Auditor 's Independence
–––––––––––––––––––––––––––––––––––––––––––––––––
Abstract:
The question for mandatory audit rotation has been a concern to academics, investors, practitioners
and the public at large. This paper is designed to determine the relationship between mandatory
audit rotations and audit Independence.
The paper makes an earnest effort to evaluate the need for rotation of auditor.
It uses different studies done at various universities at allied subjects.
It compares such provision in various statute like "Insurance Regulatory and Development
Authority", "Banking Regulatory Act", "Sarbanes–Oxley ... Show more content on Helpwriting.net
...
Since traditional agency conflicts are characteristic in large management operated corporations, the
necessity of a statutory rotation is solely related to this group of companies. Shareholders in small
and medium–size companies are to exert greater influence on the management than an average
private shareholder in a public company. This dichotomy in auditing standards has recently been
contemplated by the Ministry of Corporate Affairs in their regulation draft. Burton and Roberts
(1967) present a fundamental approach to the economic impact of auditor changes. Although,
considering the assistant role of an auditor in a stock corporation, a long–term contract between
board and auditor seems sensible, the independence in appearance might be limited due to a special
trust relationship between management and auditor in a long–term assignment. They suggest that
personal relationships between auditor and management, the combination of auditing and
consulting, as well as the auditor's goal of maintaining the assignment are determining factors
towards reducing audit quality.
According to DeAngelo (1981), quasi–rents according to low balling – without compulsory rotation
– might present a financial incentive to the auditor to give up his independence, if the probability of
exposure by the capital market is considered to be low. According to supporters of this theory, an
auditor's low balling strategy which might be related to his

Auditor Independence And Financial Statements
According to ICAEW, auditor independence mainly refers to the independence of the external
auditor from parties that have an interest in the financial statements of the business being audited. It
requires having both integrity and an objective manner to the auditing process. In order for the
concept to be deemed effective the auditor needs to carry out their work freely. One of the main
purposes of auditing is to increase credibility of the entity's' financial statements, as they have
expressed their own professional opinion on the truth and fair view in accordance with the proper
accounting standards used. This is only possible if the audit is made with reasonable assurance that
it has come from an independent source and has not been influenced by other parties, such as
managers, directors or by conflict of interest.
Lindberg and Beck (2002) claim that auditor independence is hailed as the "cornerstone" in the
accounting profession as it is the core reason as to why the public trusts their professional opinion.
However, since 2000, many accounting fraud scandals have negatively impacted public opinion on
the legitimacy of the audit profession and, if in fact, its independence is uninfluenced by other
parties. One of the scandals being the sudden collapse of Enron, given that a few months prior its
bankruptcy its auditors Arthur Andersen, which was one of the five largest audit and accounting
firms, claimed that Enron was financially healthy, but in fact they were paid off

DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...

Recommended

Recommended

More Related Content

Similar to DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...

Similar to DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN... (15)

More from Beth Hall

More from Beth Hall (20)

Recently uploaded

Recently uploaded (20)

DEPARTMENT OF ACCOUNTING, TAXATION, AND LEGAL STUDIES IN...