Description

Short Answer (45 marks)

1)    In the completion stage of an audit engagement there are many tasks to complete.  Examples of these tasks include review for commitments and working paper review. 

Required:

Identify five additional tasks the auditor needs to be concerned about and address as part of the completion stage of the audit.  Be specific as to what the auditor will do in each of these areas (give specific audit procedures or steps the auditor would take to complete the task).  Identify what problems could occur if the task noted was missed by the auditor.  (15 marks)

2)    The following are unrelated situations.  For each of these independent situations, identify what type of audit opinion you would recommend, and explain why. (6 marks)

a.    Country Supply Ltd. has fully expensed the purchase of its new computers, rather than capitalizing and amortizing them, arguing that the technology changes so quickly that computers have no resale value as soon as they are purchased.  The auditors believe that the computer system should have been amortized over four years, and that the impact on the current year’s financial statements is material.

b.    The CEO of Woodbridge Industries Ltd. has asked the auditor not to send confirmations to customers as a means of verifying the accounts receivable balances at the end of the current year.  Problems have been experienced during the last three months of the year, due to the installation of a new software system.  Customers have already complained about the frequency with which Woodbridge has had to contact them with corrected information.  The audit team has examined customer payments after year end, and are satisfied that the accounts receivable amounts recorded at year end are not materially misstated.

c.    Sammy Ltd. received an unqualified audit report last year, but when the audit team arrived to carry out the current year’s audit, they discovered that many significant changes had occurred.  When his son was unable to find work upon graduating from high school, the owner took advantage of the vacancy created by the retirement of the firm’s accountant, and hired his son as the accountant. 

Since then, the accounting clerk quit and has not been replaced.  A scan of the general ledger account balances quickly revealed two new accounts that have a high volume of transactions.  Miscellaneous account one has a material debit balance and miscellaneous account two has a material credit balance, but the bank account does balance.  The audit team has discovered that there is an inadequate document trail to properly analyze the nature of the transactions being posted through the two miscellaneous accounts, and the auditors are therefore uncertain which accounts should be adjusted.