Auditing and Assurance Services

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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. 2. Jones did not study the client or its environment, including internal control, nor did the assistants. There appears to have been no audit examination at all. The work performed was more an accounting service than it was an auditing service. 3. The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit. 3. Jones acquired little evidence that would support the fairness of the financial statements. Jones merely checked the mathematical accuracy of the records and summarized the accounts. Several standard audit procedures and techniques were neglected. 2-5
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Chapter 02 - The Financial Statement Auditing Environment Standards of Reporting : 1. The auditor must state in the auditor’s report whether the financial statements are presented in accordance with generally accepted accounting principles (GAAP). 1. Jones's report made no reference to generally accepted accounting principles. Because Jones did not conduct a proper examination, the report should state that no opinion can be expressed as to the fair presentation of the financial statements in accordance with GAAP. 2. The auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.   2. Jones's improper examination would not enable her to determine whether accounting principles have been consistently applied. 3. When the auditor determines that informative disclosures are not reasonably adequate, the auditor must so state in the auditor’s report. 3. Management is responsible for adequate disclosure in the financial statements, but when the statements do not contain adequate disclosures the auditor should make such disclosures in the auditor's report. Both the statements and the auditor's report lack adequate disclosures. 4. The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor’s report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefore in the auditor’s report. In all cases where an auditor’s name is associated with financial statements, the auditor should clearly indicate the character of the auditor’s work, if any, and the degree of responsibility the auditor is taking, in the auditor’s report.
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  • Auditor's report, financial statement auditing, Statement Auditing Environment

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