Identify issues related to the responsibilities principle that Martin should c d
ID: 2336347 • Letter: I
Question
Identify issues related to the responsibilities principle that Martin should c decision to submit a proposal to conduct the audit of Phillip. Required: 15.000 people. The majority of your work, conducted by you and two assistan of compiling clients monthly statements and preparing income tax returns for individ from cash data and partnership returns from books and records. You have a small number of audit clients; given the current size of your practice, you generally consider it a challenge to LO 2-3 2.58 Performance Principle: Planning. Your public accounting practice is located in ts, consists accept new audit clients. One of your corporate clients is a retail hardware store. Your work for this client has been to preparing the corporate income tax return from a trial nce submitted by the On December 26, you receive from the president of the conns a limited the following request: We have made arrangements with First National Bank to borrow SS0 to finance the purchase of a complete line of appliances. The bank has asked us to furnish our auditors' certified statement as of December 31, which is the closing date of our accounting year. The trial balance of the general ledger should be ready by January 10, which should allow ample time to prepare your report for submission to the bank by January 20. In view of the importance of this certified report to our financing program, we trust you will arrange to comply with the preceding schedule. Required: From a theoretical viewpoint, discuss the difficulties that are caused by such a short notic audit request.Explanation / Answer
Such short-notice audit request from the President is certain to pose the following difficulties to this audit firm: 1. In planning the work involved in carrying out the audit itself,----satisfactorily & in adequate detail. 2. in planning personnel for the the assignment among his other work-ie. Assigning the assistants 3. Inadequate time for discussion amongst themselves for proper review & winding up with the client 4. There may be let-down of the principle of due care --as the audit firm has to rush up the procedures concerning (as referred in 1,2&3)--ie. planning , deputing & review & also in deciding the materiality levels, identifying and assessing risks of material mis-statement, and obtaining sufficient appropriate evidence) 5.This being an intial engagement, the auditor has to undertake additional test-checks of the current accounting practices of the client to decide the scope of the audit. 6. Leave alone the procedures, the above being the case & the time --even if started on Dec. 26th instant , being short --getting the fully new audit - even properly completed by Jan.20--is highly doubtful. 7. Last but not the least, the audit firm seems to lack adequate audit experience, as it is given that the trio only prepare existing clients' monthly financial statements & individual income-tax returns & it may be a challenge to accept any new audit assignment, in which they are yet to prove them selves. Thus ,short-notice audit request from the potential client , seen in the light of lack of audit experience of the audit firmis certain to increase the difficulties that the firm might face ,during the conduct of the audit & also in decent winding up--that does justice to the profession ,in taking adequate care while planning an audit.