Joseph Newport, CPA, is the engagement partner for the audit of Yonker Plumbing Supplies, Inc. He works for the firm Harrison and Ford, LLP. Harrison’s own audit program for this type of engagement includes in the audit work papers, procedures for testing revenue, including, but not limited to, basic audit steps such as sales cutoff testing and the investigation of revenue transactions with related parties. Newport’s audit team has identified several potential risks, including Yonker’s small and inexperienced accounting staff, the pressures on Yonker to meet budget expectations, and the potential for Yonker’s management to manipulate information and improperly recognize revenue. Newport has told his team that billable hours will reach the maximum for this client at the end of the week and does not require the most basic preliminary and analytical procedures to be performed. Newport urges that it’s time to move onto the Martin, Inc. audit and an unqualified audit report for 2010 is issued for Yonker, backed by work papers indicating that most of Harrison’s standard audit program was initialed as “not considered necessary,” or initialed as “done” without any supporting documentation.

Based on the scenario, describe what two key AICPA Rules of Conduct have been violated and why?

  • CreatedJanuary 21, 2015
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