Case 1.9: ZZZZ Best Company, Inc. 1. A review differs from an audit because a review does not allow the auditor to test or observe internal controls and assess control risk. According to AS 5, effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial statements. As a result, an auditor cannot provide reasonable assurance regarding the reliability of the financial statements by just completing a review; they must complete a full audit. An auditor can only provide limited assurance by completing a review.
If their expectations were not met then Greg Allen Construction Corp. could be held accountable. However, in order for Daniel and Sondra to obtain credit there were required inspections throughout the project. If throughout the process much of Allen’s work was unacceptable then the Estelle’s did what they were supposed to be. If the work was completed and no complaints were made during the inspections until after the work was completed then Allen’s corporation wouldn’t be held liable. That would be due to that the fact that the inspections were to have been assumed to be passed during the work.
The audit is not designed to provide assurance on internal control, or to identify significant deficiencies. However, the audit does include obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing, and extent of audit procedures to be performed. We are responsible for ensuring that the audit committee is aware of any significant deficiencies that come to our attention. The financial statements are the responsibility of the company’s management. Management is also
An auditor only looks at financial statements during a review without digging deeper to find any material misstatements or potential fraud, there is no review of the company’s internal controls, also the auditor does not look at any files that backup the financial statements they are given. In this case, the owner of the company hindered the auditor’s from doing their due diligence because he did not want his fraud discovered. 2. According to AU 326 of the Public Company Accounting Oversight Board, information from outside sources should be reliable. There should have been many substantive tests performed, objectives set forth, due diligence for true existence or occurrence of any files or contracts.
This also decreases fraud by ensuring that many different people in different departments are handling company business. Segregation of Related Activities states that making one individual responsible for related activities increases the potential for mistakes. This again decreases the potential for fraudulent activity. Segregation of Record Keeping from Physical Custody states that the accountant should never have physical custody of an asset nor should they have access to it. In addition, the custodian of the asset should not have access to accounting records.
They are not required to have knowledge and expertise to start and maintain a successful business. A business model is usually evaluated by a bank or other financial institution that the company acquires capital from. An auditor is required to uphold integrity and has a responsibility to the stockholders to maintain competence and independence. All of this must be achieved while examining sufficient, pertinent evidence to obtain reasonable assurance as to the material fairness of the client's financial statements. This evidence supports what has happened thus far in the client's business.
The audit is not designed to obtain any type of reasonable assurance about these controls. If any significant deficiencies within the internal control system are discovered during the audit we will express concern to management, and the audit team will be made aware our findings. Not only will our firm be conducting a number of procedures to test the validity of transactions as well as obtaining confirmation of all liabilities and receivables from all parties
Since Smith’s use was ordinary, meaning that he was using the vehicle for normal everyday use under ordinary conditions, the dealer’s personal injury disclaimer cannot be enforced against him. The sales contract drawn up by the dealership is not reasonable as it favors them. It allows them to circumvent any effort to make sure the vehicle is working in a safe manner prior to the sale. In conclusion, I believe Mr. Smith will prevail against the seller for breach of warranty. The steering mechanism defect of the vehicle made it unfit for ordinary use ultimately causing the injuries.
This would not be the case for ABC because the financial statements are not accurate and the do not follow all of the accounting rules and regulations set forth by GAAS and GAAP. 2. Unqualified opinion with an explanatory paragraph – This is an unqualified opinion along with a paragraph that includes further explanation of the auditor’s opinion. 3. Qualified opinion – This opinion states the auditor’s concerns or doubts concerning the reliability in different areas of the financial statements (Mintz & Morris, 2011).
After listening to him his decision got bias. But in my opinion an employee should immediately report and error when it is discovered. All employees, especially employees who are burdened with the task of making projections which may impact the future of the company must act with integrity. Small-business investors and leaders consistently rely on the ethical collection and delivery of financial information. “According to Mintz, “Integrity is a fundamental trait of character that enables a CPA to withstand client and competitive pressures that might otherwise lead to the subordination of judgment.” The priority must be based on the professional responsibilities first rather than looking at the personal interest first.