Question

Chapter 3, Discussion Question 2: Case: Auditor Changes at Daily Journal Corporation Read the Case: Auditor Changes at Daily Journal Corporation and respond to questions 4, 5, and 6 4. From the SEC website or other sources, locate Daily Journal's Form 8-K (filed July 3, 2014) related to the appointment of BDO. What type of disclosures are provided in this filing? What are some reasons that Daily Journal would provide these disclosures? (Note: Daily Journal filed two different Form 8-Ks on July 3, 2014.) 5. Referring tot he professional standards (AU-C 210), what is BDO's responsibility with respect to communicating with EY? 6. From the SEC website or other sources, locate Daily Journal's Form 8-K (filed February 17, 2016) that announced the dismissal of BDO and engagement of Squar Milner. Compare the disclosures in this filing to those in questions (2) and (4) related to the dismissal of EY and engagement of BDO.

Answer 1

4. TYPE OF DISCLOSURES PROVIDED IN DAILY JOURNALS’S FORM 8-K(filed 3 JULY,2014)

• Firstly, it states the that daily journal corporation has received a staff delisting notice from NASDAQ stock market
• Which has happened due to failure to file their quarterly reports in FORM-10Q for first 2 quarters
• It is also provided that Earlier NASDAQ has provided the company with a Time limit till 30, June to regain compliance with NASDAQ by filling the reports
• Further it has been provided that the company has appointed “BDO USA, LLP” as its new independent accounting firm, and expects to file the pending reports as soon as possible.
• It has been further communicated that this notice will not result in immediate delisting of company from stock market and moreover company is planning to commence an appeal.
• Consequences and chances of being in favor or not of filling appeal has also been provided.
• And at last it has been provided that which statements are included in Form 8-K.

The main reason behind providing these details in Daily journal is because, as the company is a listed company and every single action affects (positively or negatively) a large number of stakeholders. And moreover, when a large number of public’s Interest and has invested in one company, it becomes the duty of company to be transparent as much as possible, so that investors and other stakeholders can decide on the basis of information( regarding what is happening in the company) to position themselves accordingly to their risk appetite i.e. to go long or short on the company.

5. AU-C 210 talks about the Terms of engagement

As per the question, below mentioned are the responsibilities of BDO with resoect to communicating with EY

It talks about agreeing to terms i.e. preconditions of audit

• Which first auditor has to determine that financial reporting framework has been followed and applied while preparation of Financial statements
• The management acknowledges its and understands its responsibility with respect to

1 Preparation of financial statements

2 Designing, implementation and maintenance of internal controls and

3.To provide auditor with access to all information which the auditor requires to complete its audit.

And all other conditions to be agreed upon in writing which will help in undertaking Independent audit.

6. Question can’t be done due to insufficient information as Question 2 has not been attached alongwith