Jane was the audit supervisor in charge of the audit of an advertising agency. Unfortunately, two other audit supervisors in the office resigned and moved on to other positions. Rather than hiring or promoting another supervisor, the firm reallocated clients. Jane was asked to take on some of the other audit clients and spend less time reviewing files and supervising staff. The audit managers and partners were expected to do a more thorough audit review to help compensate for the fewer than usual number of supervisors.
Jane felt harried, and her audit staff at the advertising agency were upset that she had not been present there for several days. The tax provision looked complex, and Jane decided to leave the tax section for the tax area to review.
To Jane’s horror, she discovered six months later that the tax provision had been incorrect by over $100,000.The client was upset that the financial statements were materially in error and decided to seek other auditors.
REQUIRED
Provide suggestions using your knowledge of audit standards and the audit for improvement to help prevent this type of error in the process, explain which audit phases were poorly executed future in the audit of the advertising agency.