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 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.
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
procedures.
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 ...
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