Dale Boucher, the owner of a small electronics firm, asked Sally Jones, CPA, to conduct an audit of the company’s records. Boucher told Jones that the audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Jones immediately accepted the engagement and agreed to provide an auditor’s report within one month. Boucher agreed to pay Jones her normal audit fee plus a percentage of the loan if it was granted.

Jones hired two recent accounting graduates to conduct the audit and spent several hours telling them exactly what to do. She told the new hires not to spend time reviewing the entity’s system of internal control but to concentrate on proving the mathematical accuracy of the general and subsidiary ledgers and summarizing the data in the accounting records that supported Boucher’s financial statements. The new hires followed Jones’s instructions and after two weeks gave Jones the financial statements excluding footnotes. Jones reviewed the statements and prepared an unqualified auditor’s report. The report did not refer to generally accepted accounting principles, and no audit procedures were conducted to verify the year- to- year application of such principles.

Required:

a. Briefly describe each of the generally accepted auditing standards and indicate how the action(s) of Jones resulted in a failure to comply with each generally accepted auditing standard.

b. Briefly describe the four categories of Principles Underlying an Audit Conducted in Accordance with Generally Accepted Auditing Standards and indicate how the action(s) of Jones violate(s) each of the four categories of principles.