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Unformatted text preview: bstantiate the truthfulness of each important assertion. For example,
to ensure the cash exists, you might call the bank, examine bank statements, or
send a letter to the bank requesting conﬁrmation of the balance. To ensure the
cash hasn’t been pledged or restricted, you might review the minutes of key management meetings to look for discussions on this issue.
Once you have ﬁnished auditing the important assertions relating to the
accounts contained in the company’s ﬁnancial statements, you will need to report
your ﬁndings to the company’s shareholders and to the investing public because
EarthWear is publicly traded.
Now, instead of EarthWear’s auditor, imagine you are a prospective investor
in EarthWear. As an investor, would the reputation of the company’s auditor matter to you? Would you want to know that the audit ﬁrm used a well-recognized
audit approach to gather sufﬁcient, appropriate evidence? What form of report
would you expect? What if the lead partner on the audit were related to EarthWear’s...
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