Class notes
Unit 1 Table
- Course
- AC503
- Institution
- Purdue University
An example for the Unit problems
[Show more]
Seller
Follow
Content preview
BRIEF DESCRIPTION OF GENERALLY HOLMES’S ACTIONS RESULTING IN FAILURE TOACCEPTED AUDITING STANDARDS COMPLY WITH GENERALLY ACCEPTED AUDITING
STANDARDS
1. The audit is to be performed by a person or 1. It was inappropriate for Holmes to hire the two students to
persons having adequate technical training conduct the audit. The audit must be conducted by persons with
and proficiency as an auditor. proper education and experience in the field of auditing.
Although a junior assistant has not completed his formal
education, he may help in the conduct of the audit as long as
there is proper supervision and review.
2. In all matters relating to the assignment, an 2. To satisfy the second general standard, Holmes must be
independence in mental attitude is to be without bias with respect to the client under audit. Holmes has
maintained by the auditor or auditors. an obligation for fairness to the owners, management, and
creditors who may rely on the report. Because of the financial
interest in whether the bank loan is granted to Ray, Holmes is
independent in neither fact nor appearance with respect to the
assignment undertaken
3. Due professional care is to be exercised in 3. This standard requires Holmes to perform the audit with due
the performance of the audit and the care, which imposes on Holmes and everyone in Holmes'
preparation of the report. organization a responsibility to observe the standards of
fieldwork and reporting. Exercise of due care requires critical
review at every level of supervision of the work done and the
judgments exercised by those assisting in the audit. Holmes did
not review the work or the judgments of the assistants and
clearly failed to adhere to this standard.
4. The work is to be adequately planned and 4. This standard recognizes that early appointment of the auditor
assistants, if any, are to be properly has advantages for the auditor and the client. Holmes accepted
supervised. the engagement without considering the availability of
competent staff. In addition, Holmes failed to supervise the
assistants. The work performed was not adequately planned.
5. A sufficient understanding of internal 5. Holmes did not obtain an understanding of internal control,
control is to be obtained to plan the audit and nor did the assistants obtain such an understanding. There
to determine the nature, timing, and extent of appears to have been no audit at all. The work performed was
tests to be performed more an accounting service than it was an auditing service.
6. Sufficient, competent evidential matter is to 6. Holmes acquired no evidence that would support the financial
be obtained through inspection, observation, statements. Holmes merely checked the mathematical
inquiries, and confirmations to afford a accuracy of the records and summarized the accounts. Standard
reasonable basis for an opinion regarding the audit procedures and techniques were not performed.
financial statements under audit.
7. The report shall state whether the financial 7. Holmes' report made no reference to generally accepted
statements are presented in accordance with accounting principles. Because Holmes did not conduct a proper
generally accepted accounting principles. audit, the report should state that no opinion can be expressed as
to the fair presentation of the financial statements in
accordance with generally accepted accounting principles.
8. The report shall identify those 8. Holmes' improper audit would not enable him to
circumstances in which such principles determine whether generally accepted accounting
have not been consistently observed in principles were consistently applied. Holmes' report should
the current period in relation to the make no reference to the consistent application of
preceding period. accounting principles.
9. Informative disclosures in the financial 9. Management is primarily responsible for adequate
statements are to be regarded as disclosures in the financial statements, but when the
reasonably statements do not contain adequate disclosures, the
adequate unless otherwise stated in the auditor should make such disclosures in the auditor's
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller terrigreenfield. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73314 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now