Auditing Standards Case Study: a thorough discussion of standards which apply in the case given

2.43 Auditing Standards Case Study. Ray, the owner of a small company, asked Holmes, CPA, to conduct an audit of the company’s records. Ray told Holmes that the audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Holmes immediately accepted the engagement and agreed to provide an auditor’s report within three weeks. Ray agreed to pay Holmes a fixed fee plus a bonus if the loan was granted. Holmes hired two accounting students to conduct the audit and spent several hours telling them exactly what to do. Holmes told the students not to spend time reviewing the controls but, instead, to concentrate on proving the mathematical accura... click for more

Choosing the Type of Audit Opinion: a practical application for business situations

16-41 (Choosing the Type of Opinion) Several independent audit situations are presented here. Assume that everything other than what is described would have resulted in an unqualified opinion. Required Indicate the type of opinion you believe should be expressed in each situation, and explain your choice. If an explanatory paragraph is needed, indicate whether it should precede or follow the opinion paragraph. a. The auditor was unable to obtain confirmations from two of the client’s major customers that were included in the sample. These customers wrote on the confirmation letters that they were unable to confirm the balances because of their accounting systems. The auditor was abl... click for more

Audit for Leases

13-39 (Audit for Leases) The Rousch Racing Company is in the business of building NASCAR race cars. They also have an engineering department that builds components for other racing teams, as well as for specialty cars built for major manufacturers such as Ford Motor Company. Rousch has three lease related accounts on their books as follows: Leasehold Improvement Balance $4,583,000 Last Year $3,600,000 Leased Equipment Balance $1,287,000 Last Year $832,000 Lease Expense Balance $624,000 Last Year $515,000 Required 1. Identify the nature of each of the listed accounts; that is, asset, liability, and expense. 2. What would cause the accounts to increase during th... click for more

Auditing - Prepare Memo To Partner following the disclosure by the client of an apparent virus interruption two weeks before the fiscal year end.

Filmore and Gus, Chartered Accountants, are the auditors of Campbell's Toy Store (CTS),a local retail operation, and you, CA, are in charge of the audit. In January 2005, you completed the inventory count and internal control testing. All procedures ran smoothly and no discrepancies were found. It is now March 22, 2005, and you are at the CTS offices to start the February 28 year-end audit. The controller, Gina Cooper, is explaining an incident that occurred before year end. "We lost control of our microcomputer system temporarily. At noon on February 14,2005, our computer system shut down. A red heart appeared on all the computer screens, with "Happy Valentine's Day" written under ... click for more

Selecting the Proper Audit Opinion and Report Modification

16-47 (Selecting the Proper Audit Opinion and Report Modification) Required Audit situations 1 through 8 present various independent factual situations an auditor might encounter in conducting an audit. List A represents the types of opinions the auditor ordinarily would issue, and List B represents the report modifications (if any) that would be necessary. For each situation, select one response from List A and one from List B. Select, as the best answer for each item, the action the auditor normally would take. Items from either list may be selected once, more than once, or not at all. Assume the following: • The auditor is independent. • The auditor previously expressed an un... click for more