Based upon ten generally accepted auditing standards, the quality control system can provide only reasonable assurance, not a guarantee, that auditing standards followed with a professional judgment of their opinion. 2-16 a. The first general standard, which states in part, that a person must perform the audit or persons having adequate technical training, requires that an auditor have education and experience in the field of auditing. . The measures of the quality of the auditor’s performance are by accepting the general standards of auditing. c. The general group of the generally accepted auditing standards includes a requirement of due professional care be exercised by the auditor. d. The criteria of audit plan and evidence gathering the general character of the three generally accepted auditing standards classified as standards of fieldwork. 2-20 a.
The ethical implications of Rossi and Montgomery’s accepting the engagement is having adequate training and proficiency, due professional care, proper planning and supervision, sufficient understanding of the entity, its environment, and its internal control. Since Mobile Home Manufacturing Company decided to issue stock to the public and Rossi and Montgomery’s CPA firm never had a client to go public or might not had proper training of filling necessary paperwork for SEC should not accept the engagement. b.
The auditor may face some problems when filing the SEC of the following: new securities registration statement submitted for approval, commission examines the statements for completeness before allowing their client to sell on the securities exchange, and require the financial statements along with the opinion of the independent firm to be part of the registration statement and subsequent reports. Let us not forget the auditor must file all of the proper paperwork from the S-1 form to register new security and any other special S-forms.
The 8-K form includes the sale of subsidiary, change in officer, a new product line, or change of auditors. The 10-K form must file the annual report within 60 to 90 days after the close of each fiscal year according to the size of company. The 10-Q form must be file quarterly for all public held companies that contain valuable information within the financials to be review by the auditors before filing with the commission. Chapter 3 3-23 a.
The report includes additional paragraphs for the definition and limitations of internal control of the combined report on the financial statements and internal control over financial reporting is correct. b. The date of the CPA’s opinion on the financial statements of the client should be the date of the completion of all important audit procedures. c. If a principal auditor decides to refer in his or her report to the audit of another auditor, he or she is required to disclose the portion of the financial statements audited by the other auditor. -25 a. A CPA will issue an adverse auditor’s opinion if the exception to the fairness of presentation is so material that an “except for” opinion is not justified. b. An auditor will most likely disclaim an opinion because of a client-imposed scope limitation. c. The paragraph expresses an qualified opinion “In our opinion, except for the effects of not capitalizing certain lease obligations, as discussed in the preceding paragraph, the financial statements present fairly”, in all material respects,… 3-26 a.
It allows immaterial errors to be review if the financial statements show misinformation within the transactions and balances. b. Using the phrase “In conformity with accounting principles generally accepted in the United States of America” rather than “are properly stated to represent the true economic conditions” indicate the auditor followed standards of the Public Company Accounting Oversight Board. Because financial statements prepared in accordance with U. S. accounting principles and audited in accordance with U. S. uditing standards are available throughout the world on the Internet, the country of origin of the accounting principles used in preparing the financial statements and auditing standards followed by the auditor identified in the audit report. c. Using the phrase “In our opinion” indicates that maybe some information risk associated with the financial statements, even though the statements been audit. Also, the first and fourth generally accepted auditing reporting standards that require auditors to state an opinion about the financial statements taken as whole, including a conclusion about whether the company followed U.
S. generally accepted accounting principles or the IFRS issued by the IASB. d. The name identifies that CPA firm or practitioner who performed the audit to ensure the quality of the audit meets professional standards of legal and responsibility. e. Using material misstatement within the audit report conveys that the auditors are responsible only to search for significant misstatements, not the minor misstatements that do not affect users’ decisions.