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    CSSC external audit: pre-audit planning meeting goals

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    Details: The following situations have caused you to become concerned about the quality of the upcoming external audit:

    The CPA firm that has been contracted by CSSC management has only been in business 2 years and is a small firm with mostly young inexperienced auditors.

    You have just been advised that the preaudit planning and review meeting with this CPA firm has been changed from a 2-day meeting to a one half day meeting due to its existing workload.

    The managing partner of this CPA firm is the nephew of a CSSC board member.
    The lead auditor worked for CSSC while attending college.
    The auditing team will consist of college students who are working on their accounting degrees.

    To control costs, upper management has advised the audit will be focused on reviewing the financial results and that some areas of control that have been of concern to the auditing department will not be audited.

    GAAS provides three categories of standards and 10 standards by which an audit should be performed. You are concerned that some of the listed situations may be in violation of the GAAS standards and have decided to review the GAAS standards to detect any possible violations.

    List each of these standards in the correct category.
    Identify those standards that you believe may be compromised by the listed situations.
    Describe specific actions that you believe should be taken to comply with the GAAS standards.

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    Solution Preview

    The generally accepted auditing standards are divided into three groups as shown below. The emphasis for each of the groups is that general standards refer specifically to the auditor, fieldwork standards have to do with the conduct of the audit, and reporting standards refer to communicating the auditor's opinion.

    General Standards
    1. The auditor must have adequate technical training and proficiency to
    perform the audit.
    2. The auditor must maintain independence in mental attitude in all
    matters relating to the audit.
    3. The auditor must exercise due professional care in the performance of
    the audit and the preparation of the report.

    Standards of Field Work
    1. The auditor must adequately plan the work and must properly supervise
    any assistants.
    2. The auditor must obtain a sufficient understanding of the entity and
    its environment, including its internal control, to assess the risk of material
    misstatement of the financial statements whether due to error
    or fraud, and to design the nature, timing, and extent of further audit
    3. The auditor must obtain sufficient appropriate1 audit evidence by performing
    audit procedures to afford a reasonable basis for an opinion
    regarding the financial statements under audit.

    Standards of Reporting
    1. The auditor must state in the auditor's report whether the financial
    statements are presented in accordance with generally accepted accounting
    principles (GAAP).
    2. The auditor must identify in the auditor's report those circumstances
    in which such principles have not been consistently observed in the
    current period in relation to the preceding period.
    3. When the auditor determines that informative ...

    Solution Summary

    The solution first presents the General Standards, the Standards of Field Work, and the Standards of Reporting for review and reference in the problem. A paragraph or two is included in response to each of the questions and all are referenced back to the auditing standards shown in the problem.