Question

1. Describe the purpose of the predecessor-successor auditor communications? What information should be communicated between the predecessor and the successor? Who has the responsibility to contact whom? Did E&W property disclose information to Price Waterhouse?
2. Ernst & Whinney performed a "review" for ZZZZ Best. What steps or procedures are used when doing "reviewed" financials for a company? How does it differ from an audit? How are reviewed financials and audited financials different when considering level of assurance to the users of financial statements?
3. What is an engagement letter? What types of things are included in the engagement letter?
4. Many students would argue that signing the confidentially agreement restricted E&W from getting proper evidence. Thus; their scope was restricted. Create a valid reason why E&W would sign this agreement? If clients-impose restrictions so the scope of the audit is really restricted what type of opinion would you issue in this situation and why?
5. What are analytical procedures? How would they have helped in this audit?
6. When auditing accounts receivables there are a few procedures to verify that the a/r is valid and collectable. One acceptable test is to look to see if the a/r was paid after year end. This is normally reliable evidence. Why was it not in this situation?

Answer 1

Answer:

The term predecessor auditor alludes to a auditor who has given an account of the latest evaluated financial summaries or was engaged in to perform yet didn't finish a audit of the fiscal reports and has resigned, declined to represent reappointment, or been advised that their administrations have been, or might be, terminated.

The term successor auditor alludes to an auditor who is thinking about tolerating a commitment to audit financial statements .

The successor inspector or auditor should make explicit and sensible requests of the predecessor reviewer with respect to issues that will help the successor auditor in deciding if to acknowledge the commitment. Matters subject to request ought to incorporate—

Data that may bear on the integrity of management.

Conflicts or Disagreements with the executives as to accounting standards, auditing techniques, or other comparably huge issues.

Correspondences or communication to review boards of trustees or others with equivalent power and responsibility in regards to misrepresentation, unlawful acts by customers, and internal control-related issues.

The predecessor auditor's understanding with regards to the purposes behind the difference in auditors.

AUDIT ENGAGEMENT LETTER

The audit commitment letter expresses the terms and states of the commitment, chiefly tending to the extent of the commitment or engagement and the terms of compensation for the firm.

They ought to incorporate the accompanying:

• The goal and extent of the review or audit;
• The responsibilities of the auditor;
• The responsibilities of management;
• The identification of an applicable financial reporting framework; and
• Reference to the normal structure and substance of any reports to be given.

REVIEW VS AUDIT:

An audit is the assessment of the financial related reports for an entity so as to decide if the data exhibited mirrors the financial position of the entity at a given date. An audit intends to distinguish material errors in the fiscal reports and incorporates, however isn't constrained to, misstatements coming about because of misrepresentation where sensible doubt exists. An audit gives a sensible degree of assurance as a positive statement, for example, '‘presents fairly' or 'presents a genuine and reasonable view'. An audit doesn't give supreme confirmation (as this would require testing each exchange which is unrealistic) however is the most elevated level of affirmation gave by auditors. It includes detailed testing, for example, substantiating balances and evidence gathering.

A review then again gives just constrained assurance. The opinion given would be in a structure, for example, 'we have not become aware of any matter' that the announcements are not as per the necessary framework. A review includes less detail than a audit and includes more enquiry of the board/staff and systematic review work instead of validating adjusts. A review shouldn't be completed by an registered organization auditor yet their more prominent involvement with this zone regularly implies better worth is conveyed from the review.

ANALYTICAL PROCEDURES:

Analytical procedures are a sort of proof utilized during an audit. These techniques can show potential issues with the financial related records of a customer, which would then be able to be explored all the more completely.Analytical procedures include comparisons of different sets of financial and operational information,, to check whether chronicled connections are proceeding ahead into the period under review. As a rule, these connections or relationships ought to stay steady after some time. If not, it can suggest that the customer's financial records are mistaken, potentially because of blunders or fraudulent reporting activity. .