Homework chapter 2
Professor Hightower, Sonja
1. RQ2-5 Answer: Management is primarily responsible for the fairness of the company’s financial statement. Similarly, the auditors are responsible for establishing and maintaining internal control in order to ensure that the financial statements fairly present the entity’s financial conditions and operations. However, the auditor only can provide reasonable assurance with respect to errors, fraud, and illegal acts.
2. MC 2-15: B 2-16: A 2-17: A 2-18: D 2-19: C
3. P2-24 Answer: a. Type of audit: operational
Type of auditor: government b. Type of audit: Financial statement Type of auditor: external c. Type of audit: operational or compliance Type of auditor: internal or external d. Type of audit: forensic Type of auditor: internal or forensic e. Type of audit: operational Type of auditor: government, external f. Type of audit: operational Type of auditor: internal g. Type of audit: compliance Type of auditor: government h. Type of audit: forensic Type of auditor: government P2-25 Answer: a. According to the general standards, Jones should not to hire two students to conduct the audit because the audit need to be performed by a person or persons having adequate technical training and proficiency as an auditor. Furthermore, the auditors need to maintain independence in mental attitude in all matters relating to the audit, but Jones is not independence in mental attitude because the bank loan is granted to Boucher. Finally, the auditor need to professional care in the performance of the audit and the preparation of the report. In this case, Jones is also failed to satisfy the third requirement because he did not supervise the work.
b. Firstly, an audit is to provide an opinion by an auditor on whether financial statements are presented fairly, in all material respects, according to the applicable framework. However, Jones did not present a fairly opinion regarding the financial statements. Secondly, auditors are responsible for having appropriate competence and capabilities to perform the audit, complying with relevant ethical requirements, and maintaining professional skepticism and exercising professional judgment, throughout the planning and performance of the audit. Jones hired two-graduated students who do not have appropriate competence and capabilities to conduct the audit, and he was bias with respect to the client under audit, so Jones did not fulfill the responsibilities of audit. Thirdly, the auditors need to obtain reasonable assurance, which is a high, but not absolute, level of assurance. Jones did not supervise the work and lacks knowledge of his client. As a result, Jones does not have enough evidence to support his opinion of the financial statement to be fair. Finally, Based on an evaluation of the audit evidence obtained, the auditor expresses an opinion in…