Question

Aaron, CPA, accepted an engagement to audit the financial statements of Eastern Corporation., a new client....

Aaron, CPA, accepted an engagement to audit the financial statements of Eastern Corporation., a new client. In the course of conducting the audit and applying proper audit procedures, Aaron discovered that financial statements may be materially misstated due to the existence of fraud. Required:

(a) Describe Aaron's responsibilities for reporting on Eastern’s financial statements and other communications if Aaron is precluded from applying necessary procedures in searching for frauds.

(b) Describe Aaron's responsibilities for reporting on Eastern's financial statements and other communications if Aaron concludes that Eastern's financial statements are materially affected by frauds.

Homework Answers

Answer #1

A.    If Aaron is precluded from applying necessary procedures, Aaron should disclaim or qualify an opinion on the financial statements and communicate these findings to Eastern's audit committee or its board of directors.

B. If Aaron concludes that Eastern's financial statements are materially affected by frauds, Aaron should insist that the financial statements be revised and, if they are not, express a qualified or an adverse opinion on the financial statements, disclosing all the substantive reasons for such an opinion. Additionally, Aaron should adequately inform Eastern's audit committee or its board of directors about the frauds.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A CPA is auditing a client's financial statements and is performing procedures to audit accounts receivable....
A CPA is auditing a client's financial statements and is performing procedures to audit accounts receivable. While reviewing the financial statements, the auditor verifies that accounts receivable is shown as a current asset. Which financial statement assertion is the auditor testing? (Select only one.) Select one: a. Rights/Obligations b. Existence/Occurence c. Presentation/Disclosure d. Valuation/Allocation e. Completeness
19.   Under to PSA 260, those matters that arise from the audit of financial statements and...
19.   Under to PSA 260, those matters that arise from the audit of financial statements and in the opinion of the auditor, are both important and relevant to those charged with governance in overseeing the financial reporting and disclosure process are called a.   Audit matters of governance interest b.   Significant audit matters c.   Auditor findings d.   Material misstatement in the financial statements 20.   Audit matters of governance interest to be communicated to those charged with governance ordinarily include a.   Audit...
Alison Kotecha, CPA, is meeting with a potential new audit client, Klein Advertising. Alison advertised her...
Alison Kotecha, CPA, is meeting with a potential new audit client, Klein Advertising. Alison advertised her firm, A Kotecha, CPA, in the local newspaper. However, she ended up paying Jon Smit, a former colleague, $1,000 for the referral. Although she hasn’t performed any audit engagements for the last four years, she did recently take a GAAP course. During the meeting, she reads over the prior year’s financial statements and tells the client she will accept the engagement. After reading the...
Evaluating a potential client requires which of the following steps? Question 21 options: 1) Communicate with...
Evaluating a potential client requires which of the following steps? Question 21 options: 1) Communicate with the predecessor auditor. 2) Preplan the audit. 3) Establish the terms of the engagement. 4) None of these. Question 22 (3 points) What factor would most likely would cause a CPA not to accept a new audit engagement? Question 22 options: 1) the prospective client's unwillingness to permit inquiry of its legal counsel 2) the inability to review the predecessor auditor's documentation 3) the...
Which term would best describe Just for FEET, Inc.’s increase in outstanding vendor allowance receivables of...
Which term would best describe Just for FEET, Inc.’s increase in outstanding vendor allowance receivables of $400,000 at the end of fiscal 1997 to nearly $29,000,000 at the end of fiscal 1998? Most likely true (highly probable) Fifty-fifty chance of being true Impossible/unbelievable Normal PSLRA is the anachronism for: Private Securities Liabilities Refund Act. Private Securities Litigation Reform Act. Pennsylvania State Legislators’ Retirement Account. Professional Society for Less Restrictive Auditing. Which of the following are key features of the PSLRA?...
During the trial, lawyers for the accused said that the men believed that the accounting decisions...
During the trial, lawyers for the accused said that the men believed that the accounting decisions they made were appropriate at the time, and that the accounting treatment was approved by Nortel’s auditors from Deloitte & Touche. Judge Marrocco accepted these arguments. Marrocco added he was “not satisfied beyond a reasonable doubt” that the trio (i.e., Dunn, Beatty, and Gollogly) had “deliberately misrepresented” financial results. Given the facts of the case, do you believe Judge Marrocco’s decision was justified? Explain....
What role could the governance of ethics have played if it had been in existence in...
What role could the governance of ethics have played if it had been in existence in the organization? Assess the leadership of Enron from an ethical perspective. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among the top Fortune 500 companies, collapsed in 2001 under a mountain of debt...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT