your_a_senior_case - Almost a Senior Auditor You have...

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Almost a Senior Auditor You have recently completed one full year on the audit staff of a CA firm (hereafter ‘your firm”). During that year, you were assigned as a staff-level auditor to your firm’s examination of the financial statements of the University of Waterloo Credit Union, (UWCU). Brenda Bailey, the audit senior last year who was responsible for overseeing the fieldwork on a day-to-day basis, left your firm after the audit was completed to take a position as Vice President of Finance with UWCU. Terry Johnson, the engagement manager, informed you that, even though you were yet to be formally promoted to ‘senior auditor,’ you would have the in-charge responsibility for this year’s audit of UWCU. Naturally, you were anxious to do a good job and believed that this opportunity could result in an early promotion to senior. To gather background information and to identify matters relevant to planning this year’s audit, you first checked the correspondence file for communications between your firm and the client; you then reviewed the report file for prior years’ audit reports and management letters, and pulled out last year’s audit working papers and the permanent file. Last year’s balance sheet and income statement are presented in Table 1 and Table 2, respectively. You noted nothing unusual in your review of the correspondence file. For example, you found a typical engagement letter, signed by the client, acknowledging their understanding of the nature of the examination to be performed, the specific responsibilities to be performed by the client and the CA firm, and agreement about fees and billing arrangements. Your firm bills the client quarterly based on the firm’s standard rates for actual hours incurred plus travel and out-of- pocket expenses for the two staff auditors, the in-charge, the manager, and the engagement partner. The engagement letter estimated that total fees would not exceed $100,000. Although the prior year’s engagement letter identified the same estimated fee, the firm’s standard billing rates have increased about 10 percent on average this year. Thus if this year’s fee is to meet the estimate, the audit team must have fewer budgeted hours this year relative to prior years. In addition, you found several letters from your firm’s tax department documenting verbal responses to specific tax inquiries initiated by the client. (The tax department’s time is billed separately and is not subject to the audit engagement letter.) The tax department contact for UWCU was Cathy Dale and you made a mental note that Cathy was the appropriate one to call if any tax-related issues came up during the audit. Finally, you saw several letters between the engagement partner and the Credit Union’s CEO related to client relations, including an invitation to attend the firm’s annual golf outing. The report file contained copies of the Credit Union’s audited financial statements and your
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This note was uploaded on 11/23/2009 for the course AFM 480 taught by Professor Gb during the Spring '09 term at Waterloo.

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your_a_senior_case - Almost a Senior Auditor You have...

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