Evidence

What do you consider the easiest type of audit evidence to obtain and why? What do think is the hardest type of evidence to obtain and why?

8-1

1. When assessing audit risk, should auditors consider the type and number of third parties that may ultimately rely on the client’s financial statements? 2. Should auditors insist that audit engagement letters identify the third parties to whom the client intends to distribute the audited financial statements? 3. Would this practice eliminate auditors’ legal liability to nonprivity parties not mentioned in engagement letters?

In performing an audit...

18. In performing an audit, Jackson, CPA, discovers that the professional competence necessary for the engagement is lacking. Jackson informs management of the situation and recommends another local CPA firm, and management engages this other firm. Under these circumstances A) Jackson may request compensation from the other CPA firm for any professional services rendered to it in connection with the engagement. B) Jackson may accept a referral fee from the other CPA firm. C) Jackson has violated the AICPA Code of Professional Conduct because of non-fulfillment of the duty of performance. D) Jackson’s lack of competence should be construed to be a violation of generally accepted auditin... click for more

Basic Sampling: a. What would you tell Reagan about the advantages and disadvantages of sampling? b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell him? c. Reagan has heard about sampling and nonsampling risk and is concerned about these risks. 1. Define sampling and nonsampling risk. 2. How can Reagan control his exposure to sampling and nonsampling risk? 3. What are some possible examples of sampling and nonsampling risk in this situation?

E.54 Basic Sampling: Comprehensive. Reagan is considering opening a multipurpose hardware and lawn store in Anytown, USA. Based on his knowledge of the industry, he feels that if the average household income is greater than $35,000, the store will ultimately be successful. He was planning on attempting a census of the income levels in Anytown, USA, but has heard about sampling and is now considering using sampling to provide him with the necessary information to make his decision. Required: a. What would you tell Reagan about the advantages and disadvantages of sampling? b. Reagan is interested in knowing the advantages and disadvantages of statistical sampling. What would you tell hi... click for more

Auditing

When would it be appropriate to have an unscheduled audit? What are the steps in adminstering an audit?