- Whitlow & Company is a brokerage firm registered under the Securities Exchange Act of 1934. The act requires such a brokerage firm to file audited financial statements with SEC annually. Mitchell & Moss, Whitlow’s CPA s, performed the annual audit report for the year ended December 31, 2009 and rendered an unqualified opinion (clean opinion), which was filed with SEC along with Whitlow’s financial statements. During 2009, Charles the president of Whitlow & Company was engaged in a huge embezzlement scheme that eventually bankrupted the firm. As a result, substantial losses were suffered by customers and shareholders of Whitlow & Company including Thaxton, who recently purchased several shares of stock of Whitlow & company after reviewing the Company’s 2009 audit report. Mitchell & Moss’s audit was deficient; if they had complied with GAAS, the embezzlement would have been discovered. However, Mitchell & Moss had no knowledge of the embezzlement, nor could their conduct be categorized as reckless You are appointed as the auditor of the company and in the given scenario you have to justify your role as an auditor
- The creditors of an insolvent corporation relied on the audited financials and subsequently sued the accountants, alleging that they were guilty of negligence and fraudulent misrepresentations. The accounts receivable had been falsified by adding to approximately $650,000 in accounts receivable and another item of over $700,000. The creditors alleged that careful investigation would have shown the $700,000 to be fraudulent. The accounts payable contained similar discrepancies. The court held that the accountants had been negligent but ruled that accountants would not be liable to third parties for honest blunders. Draft an audit report for the given situation
- The cashier of a company committed a fraud and absconded with the proceeds thereof. This happened during the course of the accounting year. The Chief Accountant of the company and the Internal Auditors failed to discover the fraud. Before the external audit was completed the fraud was discovered by the Chief Accountant. If you are appointed as the external auditor of the company identify the types of audit evidence which you will require as sufficient appropriate audit evidence and also assess the audit risk and associated risk factors.
- Identify the audit risks associated with and draw the detailed audit plan to carry out the audit of :-
- Fixed Assets