4 since the audit manager had declined a job offer

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4. Since the audit manager had declined a job offer, they may have a close relationship that may "appear" less than independent (that is completely clear from the facts). 5. The significant ownership in the client by a relative may be an issue if the audit manager is assigned to the job. I would recommend that Brandt offer the write-up and consulting and let someone independent do the audit. 6. There are four major sources of an auditor's legal liability. One source is liability to the audit client under common law. Briefly summarize the other three sources. 1. Common law to third parties. This is for negligence or fraud that causes damages to those that rely on the financial statements. This is based on case law. 2. Federal statutory law (civil liability). This is based on written laws such as the securities acts of 1933 and 1934. The action can be brought for negligence or fraud that causes damages to those that rely on the financial statements. 3. Federal statutory law (criminal liability). This is for willful violation of laws. CPAs can be found guilty for criminal action under both federal and state laws. Most laws consider it a crime to defraud knowingly and/or be involved with falsifying financial statements.?
 7. Match nine of the terms (a-k) with the definitions provided below (1-9):a. Footb. Computec. Scand. Inquiree. Countf. Traceg. Recomputeh. Readi. Examinej. Observek. Compare G__ 1. A calculation done by the auditor independent of the client .__A__ 2. Addition of a column of numbers to determine if the total is the same as the client's. __K__ 3. A comparison of information in two different locations. __J__ 4. A use of the senses to assess certain activities. __F__ 5. Following details of transactions from original documents to journals. __C__ 6. A less detailed examination of a document or record to determine if there is something unusual warranting further investigation .__D__ 7. Obtaining information from the client in response to specific questions. __E__ 8. A determination of assets on hand at a given time. __H__ 9. An examination of written information to determine facts pertinent to the audit. 8. Auditors routinely conduct analytical procedures in the planning, testing, and completion phases of the audit. Identify the primary and secondary purposes of performing analytical procedures in each phase of the audit.
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The primary reason for analytical review during planning is to enhance the auditor's understanding of the client's business and the activity that has occurred over the audited period. That is, use ratios to see how the client compares to prior years and the industry to notice changes and patterns. This is mostly about learning the client's business model and industry to be able to understand the elements to assist in planning the tests of balances and accounts. The secondary reason is to identify risk areas. That is, are the relationships expected and reasonable and changes explained in ways that match other known things about the business (sales up or down or whatever). This helps to reveal where to allocate time and energy and gather more evidence. Your study guide is attached with instructional comments to help you, including an opinion paragraph, discussion of two AICPA rule of conduct violations and reasons for conducting analytical review (with reference to PCAOB).
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