Auditing Assignment
Auditing
Chapter 3 Homework
3-27 a. These are the items that should be included in the auditor’s report: 1. Normal receivable confirmation procedures, although not used, should not be listed here since it was not material, and the auditor was able to gain a satisfactory opinion from the client’s use of them. 2. The change in the accounting method for long-term construction doesn’t need to be included here since it is discussed in the footnotes. 3. Lawsuits are normally included in the footnote.
b. These are Allison’s reporting deficiencies: 1. The fact that there wasn’t a consistent application of GAAP should be included in a separate paragraph. 2. There should be a separate paragraph stating the client’s unwillingness to provide a statement of cash flows. 3. The word material isn’t included in the first paragraph when referring to “material misstatement.” 4. The difference of a period and specific date should be noted when referring the income statement, retained earnings and the balance sheet. 5. There isn’t a paragraph listing the financial statements that received an audit, the dates, or the responsibilities of the auditor or management. 6. There is no paragraph describing what an audit is. 7. This opinion should be qualified rather than qualified because of the lack of providing a statement of cash flows. 8. The report should state that these were GAAP in the United States of America.
3-28
a) Condition | b) Materiality Level | c) Type of Report | 1. Scope Limitation | Pervasively material | Disclaimer | 2. Non GAAP | Reasonable Material | Qualified or even adverse | 3. Lack of independence | Not applicable | Disclaimer | 4. None | NA | Unqualified | 5. Scope Limitation | Pervasively Material | Depends on what is fairly stated and what remains unknown. | 6. Scope limitation | Pervasively material | Unqualified
Chapter 3 Homework
3-27 a. These are the items that should be included in the auditor’s report: 1. Normal receivable confirmation procedures, although not used, should not be listed here since it was not material, and the auditor was able to gain a satisfactory opinion from the client’s use of them. 2. The change in the accounting method for long-term construction doesn’t need to be included here since it is discussed in the footnotes. 3. Lawsuits are normally included in the footnote.
b. These are Allison’s reporting deficiencies: 1. The fact that there wasn’t a consistent application of GAAP should be included in a separate paragraph. 2. There should be a separate paragraph stating the client’s unwillingness to provide a statement of cash flows. 3. The word material isn’t included in the first paragraph when referring to “material misstatement.” 4. The difference of a period and specific date should be noted when referring the income statement, retained earnings and the balance sheet. 5. There isn’t a paragraph listing the financial statements that received an audit, the dates, or the responsibilities of the auditor or management. 6. There is no paragraph describing what an audit is. 7. This opinion should be qualified rather than qualified because of the lack of providing a statement of cash flows. 8. The report should state that these were GAAP in the United States of America.
3-28
a) Condition | b) Materiality Level | c) Type of Report | 1. Scope Limitation | Pervasively material | Disclaimer | 2. Non GAAP | Reasonable Material | Qualified or even adverse | 3. Lack of independence | Not applicable | Disclaimer | 4. None | NA | Unqualified | 5. Scope Limitation | Pervasively Material | Depends on what is fairly stated and what remains unknown. | 6. Scope limitation | Pervasively material | Unqualified