11-28) Elizabeth Cole, the senior auditor-in-charge of the audit of Throne Company, a small manufacturer, was busy writing the audit report for another engagement. Accordingly, she sent Martine Joseph, a recently hired staff assistant if the CPA firm, to begin the audit of Throne Company, with the suggestion that Joseph starts with the accounts receivable. Using the preceding year?s audit working papers for Throne Company as a guide, Joseph prepared a trial balance of Throne?s trade accounts receivable, aged them, prepared and mailed positive confirmation requests, examine underlying documents plus other support for charges and credits to the Accounts Receivable ledger account, and performed such other work as he deemed necessary to assure the validity and collectibility of the accounts receivable. At the conclusion of Joseph?s work, Cole traveled to Throne Company to review Joseph?s working papers. Cole found that Joseph had carefully followed the prior year?s audit working papers.
State how three generally accepted auditing standards of fieldwork were fulfilled, or were not fulfilled, in the audit of the accounts receivable of Throne Company.
First, we review the standards of field work for an audit:
Standards of Field Work
1. The work is to be adequately planned and assistants, if any, are to be properly supervised.
2. A sufficient understanding of internal control is to be obtained to plan the audit and to determine the nature, timing, and extent of tests to be performed.
3. Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations to afford a reasonable basis for an opinion regarding the financial statements under audit.
Because Cole was busy with another engagement, the work for the Throne Company was not planned at all. The staff member should have had an audit program listing the exact steps to perform. Still the audit ...
The audit procedures for Throne Company are not in compliance with the three standards of field work. The 500 word solution explains exactly what the deviations are, and how they should have been properly applied in this situation. It is a comprehensive look are the issues.