Quintina Richmond Chapter 3 3-28

A 1 Scope resrictions 2 Fianancials do not follow GAAP 3 Lack of independence 4 none 5 Scope resrictions 6 Scope resrictions B Highly material unqualfied Highly material material Highly material Highly material C disclaimer adverse disclaimer unqualified disclaimer disclaimer

3-30
A 1 failure to follow GAAP 2 failure to follow GAAP 3 scope restriction 4 scope restriction 5 scope restriction 6 failure to follow GAAP 7 B highly material immaterial highly material highly material highly material material material C adverse unqualified-modified wording disclaimer disclaimer qualified ipinion unqualified-standard wording unqualified-standard wording

3-32 1. 2. 3. 4. 5. The title should include independent. Letter should be address to shareholders not the audit committee. Introductory paragraph should say an audit has been done. The report does not list the balance sheet dates and accounting periods. The sentence that states Other auditors audited the financial statements of certain subsidiaries should have been in the introductory paragraph. 6. The scope didnt state that the audit was free of material misstatement. 7. Explanatory paragraph should go after opinion paragraph. 3-33 1. Report title is the same. 2. Audit address is the same. 3. Introductory paragraph is the same with some differences. In the ISA audit they include that there is a summary of significant accounting policies and other explanatory notes. 4. The scope paragraph lists a title when going into the managements and the auditors responsibilities. They also give a detailed description as to what management

5. Responsibilities are. In the auditors responsibilities they stated that they have to comply with ethical requirements. 6. The opinion paragraph, name of firm, and audit report date are the same as the U.S. generally accepted auditing standards. Chapter 4 4-21
a. Rule 101 Independence no violation, Martinez did not participate in the audit and he does not have indirectly interest. b. Bacon violates rule 201 general standards. Bacon does not have any knowledge or experience in computers. c. Allen violates rule 201 integrity and objectivity. 201 states that in the performance of professional service a member shall not knowingly misrepresent facts or subordinate his or her judgment to others. d. Blanchard violated rule 203 accounting principles. She did not use ISAB auditing standards. e. Wendall violated rule 101 independence material, Wendall has direct ownership. f. The firm violates d 301 confidential client information, the CPAs were not supposed to discuss the clients information without permission from the client. g. Thurgood violated rule 501 acts discreditable, being convicted of crime punishable by imprisonment terminates membership without a hearing. h. Rankin violated rule 101 independence consulting and other non-auditing services.

4-24 a. Independence is essential for auditors because user rely on them to be unbiased when performing an audit. b. CPAs independence compared to other professions is that a CPAs are hired by businesses, paid by a business, engaged by management or auditing committee issuing but statement users are the ones who benefits. Other professionals are hired, paid, and engaged by clients therefore their primary responsibility is to that client. c. An auditor being able to carry an unbiased attitude throughout the audit is independence fact. Independence appearance is how others perceive the auditors independence to be. d. Yes rule 101he has direct financial interest. Probably not as because he only has 2 shares of stock which is insignificant to his wealth and income. There are strict requirements about stock ownership because of independence in appearance.

e. 4-27 1. 2. 3. 4. 5.

Independence in fact May cause auditor to misstated to enhance 1 wealth or income Audit may not be as 2 accurate as it should the auditors can become 3 complacent auditors become compalcent and not evaluate financials as they should maybe not following AICP code of professional 4 conduct Auditor may be afraid to 5 disagree with management the auditor possibly 6 prepared the statements 7

Independence in apperance User may thin that the auditor misstated to enhance wealth or income User may thin that the auditor may no be independent in there work User may think that the auditors are complacent

Consequences

AICP AICP SEC

users may think that the auditors have become compalcent and maybe not following AICP code of professional conduct user may think that the auditors are siding with management

SEC SEC AICP SEC

See column F on e.

There is no violation. Violation of rule 302 members cannot claim for tax refunds for a contingent fee. Violation of rule 502 members cannot solicit on other forms of solicitation. No violation. Violation of rule 101 because of materiality. The increase will possibly affect Elberts wealth and income. 6. No violation but Finigan should remain professionalism and even though shes joking she must remain independence in appearance. 4-28 Barbara ethical dilemma is whether she should throw out the small schedules and not maintain her responsibilities as a CPA or should she keep the small schedules and deal with Jack.
1. The facts are misstatements were discovered and Jack wants her to throw them out. 2. Is it throwing away the schedules the ethical thing to do? 3. Barbara may gain a bad reputation. a. Delancey Fabrics may feel as though the audit was inconsistent. b. Delancey Fabrics investors may feel as though the audit was inconsistent. c. Jack possibly fired. 4. Speak with Jack supervisor, throw away the schedules, keep the schedules, quit her job. 5. Jack may get fired, Barbara may get fired and the firm sued, the audit may be unqualified, she will have to find another job and maybe explain to the new company why she left her previous job.

6. The appropriate action would be for Barbara to do the ethical thing and that is inform Jack about the misstatement again and if he continues to tell her to throw them away she should inform Jacks supervisor. If she dont she not only jeopardize her job but the firm as well.