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Case 1-Comprehensive Case On Audit Reports (AICPA Adapted) Items (A) To (G) Present Various Independent Factual Situations An Auditor Might

The document describes 7 different engagements that a professional accountant may perform and requires identifying the nature of each engagement, applicable standards, and key procedures. The engagements include audits of financial statements prepared under regulatory requirements or to express an opinion on fairness, a review of financial statements for a loan application, agreed upon procedures related to a debt covenant, reporting on prospective financial data for a loan application, reviewing quarterly financial statements for submission to agencies, and compiling a complete set of financial statements without expressing an opinion.

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166 views2 pages

Case 1-Comprehensive Case On Audit Reports (AICPA Adapted) Items (A) To (G) Present Various Independent Factual Situations An Auditor Might

The document describes 7 different engagements that a professional accountant may perform and requires identifying the nature of each engagement, applicable standards, and key procedures. The engagements include audits of financial statements prepared under regulatory requirements or to express an opinion on fairness, a review of financial statements for a loan application, agreed upon procedures related to a debt covenant, reporting on prospective financial data for a loan application, reviewing quarterly financial statements for submission to agencies, and compiling a complete set of financial statements without expressing an opinion.

Uploaded by

LisetteDelaRosa
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 13

Case 1- Comprehensive Case on Audit Reports

(AICPA Adapted) Items (A) to (G) present various independent factual situations an auditor might
encounter in the course of an audit of financial statements. For each situation, indicate the appropriate
audit opinion and report modification, if any.

1. In auditing the available-for-sale securities account, the auditor is unable to obtain audited
financial statements for an investee located in a foreign country. The auditor concludes that
sufficient appropriate evidential matter regarding this investment, cannot be obtained.
2. Due to recurring operating losses and working capital deficiencies, an auditor has substantial
doubt about an entity’s ability to continue as a going concern for a reasonable period of time.
However, the financial statement disclosures concerning these matters are adequate. A group
engagement partner decides to assume responsibility for the work of another auditor. The
component auditor audited a wholly owned subsidiary of the entity and issued an unqualified
opinion. The total assets and revenues of the subsidiary represent 15% and 16% respectively, of
the total assets and revenues of the entity being audited.
3. An entity issues financial statements that present financial position and results of operations but
omits the related statement of cash flows. The client-prepared notes to the financial statements
discloses that “management does not believe that the statement of cash flows to be a useful
financial statement.”
4. An entity changes its depreciation method for factory assets from the straight-line method to
the service hours method (for half of the assets) and the units of production method (for the
remaining assets). The auditor concurs with the change, although it has a material effect on the
comparability of the entity’s financial statements.
5. The audit client is a defendant in a lawsuit alleging infringement of certain patent rights.
However, the ultimate outcome of the litigation cannot reasonably be estimated by
management at this time. The auditor believes it is reasonably possible for the client to incur a
significantly material loss. The lawsuit is adequately disclosed in the notes to the financial
statements.
6. An audit client discloses in the notes to the financial statements certain finance lease
obligations. The auditor noted that these leases, while properly disclosed, were not capitalized.
The auditor believes that the non-capitalization of these leases violates PAS No. 17 on Leases.
Chapter 15

Case 1 -CPA Services and Engagements

Requirement: Each of the following statements describes an engagement performed by a professional


accountant. For each description, identify the nature of the engagement, state the applicable
professional standard (if any), and enumerate the principal types of procedures performed for the
engagement.

1. The CPA conducted an examination of the financial statements of a water utility company and
the financial statements are prepared in accordance with the requirements of the water utilities
commission.
2. The CPA conducted an examination for the purpose of expressing an opinion on the fairness of
the client’s financial statements.
3. The CPA reviewed the financial statements of a small company. The CPA’s report will be used to
comply with the requirements of the bank for loan applications.
4. The CPA accepted an engagement with a client to perform certain procedures of an audit
nature. This engagement aims to establish compliance with a debt covenant to which the client
is party.
5. The CPA was requested to report on prospective financial data accompanying a loan application
classified as a specific borrowing. The loan, if granted, will be used to finance the construction of
office headquarters. The prospective data reflect various combinations of assumptions related
to the office headquarters which will be constructed.
6. The CPA is engaged to review the quarterly financial statements of the client, which will be
submitted to various government agencies.
7. The CPA is engaged to summarize financial information and prepare a complete set of financial
statements, without expressing an opinion on these financial statements.

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