During the 2004 DHB audit, the company’s independent auditors had considerable difficulty obtaining reliable audit evidence regarding the $7 million of obsolete vest components that allegedly had been destroyed by a hurricane. What responsibility do auditors have when the client cannot provide the evidence they need to complete one or more audit tests or procedures?
Answer to relevant QuestionsWhat responsibility, if any, do auditors have to search for related-party transactions? If auditors discover that a client has engaged in related-party transactions, what audit procedures should be applied to them?The audit committee of DHB Industries was criticized for failing to carry out its oversight responsibilities. What are the primary responsibilities of a public company’s audit committee?Identify what you consider to be the three most important “take-aways” or learning points in this case. Rank these items in order of importance (highest to lowest). Justify or defend each of your choices.What audit procedures do professional auditing standards require that auditors apply to related party transactions? Would any of these procedures have resulted in Ernst & Young discovering the true nature of the cash ...Do you believe that the PCAOB overstepped its regulatory role and responsibilities by beginning a dialogue regarding the possible need for mandatory audit firm rotation? Why or why not? Do you agree with U.S. Representative ...
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