Explore BrainMass

Auditing problem

Assume that Anne completed the audit and issued an unqualified opinion. She resolved the fuel reconciliations issue with the use of analytical procedures - comparing inventory levels for each of the past 5 years. During March, the neighboring site to the Browns' gas station was sold. As part of the financing to purchase it, an environmental study was performed. High levels of fuel contamination were discovered in the soil, after training to a leak from the Brown's property. The purchasers have initiated a lawsuit against the Browns for the costs of cleanup. The Browns in turn have sued Anne Sullivan in order to recoup their costs. Describe two possible defenses, which Anne could use in her suit against the Browns.


Solution Preview

RBC requires audited financial statements. For this Anne has audited the financial statements of RBC and has given her opinion on the financial statements and not on the environmental compliance.

The contamination of the neighboring property has occurred because of a fuel leak from Brown's property. The leak has not been reflected in the inventory levels and so Anne cannot be held responsible for falsified records.

The fuel leak is the responsibility of the Browns and not the auditor's responsibility. Anne cannot be held responsible for that.

Anne has given an unqualified report based on the books of accounts and financial statements of Brown. In no way is the assessment of financial statements related to a leak in the fuel. Anne's work is to certify the ...

Solution Summary

This explanation provides you a comprehensive argument relating to Auditing problem