Selected solutions chap 1-4.docx

Selected solutions chap 1-4.docx - 2-24 Item Number 2-25...

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2-24 Item Number Type of Audit Type of Auditor a. Operational Government b. Financial statement External c. Compliance or operational or possibly internal control Internal or external d. Forensic/Financial Internal, external, or forensic e. Operational Government, external, or internal f. Operational Internal or external g. Compliance Government h. Compliance or forensic Government, external, or forensic 2-25 a. Brief Description of Generally Accepted Auditing Standards Sally Jones' Actions Resulting in Failure to Comply with Generally Accepted Auditing Standards General Standards : 1. The auditor must have adequate technical training and proficiency to perform the audit. 1. It was inappropriate for Jones to hire the two students to conduct the audit. The examination must be conducted by persons with proper education and experience in the field of auditing. Although a junior assistant has not completed his formal education, he may help in the conduct of the examination as long as there is proper supervision and review. 2. The auditor must maintain independence in mental attitude in all matters relating to the audit. 2. To satisfy the second general standard, Jones must be without bias with respect to the client under audit. Jones has an obligation for fairness to the owners, management, and creditors who may rely on the report.
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Because of the financial interest in whether the bank loan is granted to Boucher, Jones is not independent in either fact or appearance with respect to the assignment undertaken. 3. The auditor must exercise due professional care in the performance of the audit and the preparation of the report. 3. This standard requires Jones to plan and perform the audit with due care, which imposes on Jones and everyone in her firm a responsibility to observe the standards of field work and reporting. Exercise of due care requires critical review at every level of supervision of the work done and the judgments exercised by those assisting in the examination. Jones did not review the work or the judgments of the assistants and clearly failed to adhere to this standard. Standards of Field Work : 1. The auditor must adequately plan the work and must properly supervise any assistants. 1. This standard recognizes that early appointment of the auditor has advantages for the auditor and the client. Jones accepted the engagement without considering the availability of competent staff. In addition, Jones failed to supervise the assistants. The work performed was not adequately planned. 2. The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures.
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  • Fall '17
  • John Smith

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