Ray, the owner of a small company, asked Harris, a public accountant, to conduct an audit of the company's records. Ray told Harris that an audit was to be completed in time to submit audited financial statements to a bank as part of a loan application. Harris immediately accepted the engagement and agreed to provide an auditor's report within three weeks. Ray agreed to pay Harris a fixed fee, plus a bonus if the loan was granted.
Harris hired two accounting students to conduct the audit and spent several hours telling them exactly what to do. Harris told the students not to spend time reviewing the controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarising the data in the accounting records that support Ray's financial statements. The students followed Harris's instructions and after two weeks gave Harris the financial statements, which didn't include footnotes. Harris reviewed the statements and prepared an unqualified auditor's report. The report didn't refer to Australian accounting standards, nor to the year-to-year application of such principles.
REQUIRED
Briefly describe how the action(s) of Harris resulted in a failure to comply with Australian auditing standards.
Organise your answer as follows:
AUDITING STANDARDS......HARRIS'S ACTIONS RESULTING IN FAILURE TO COMPLY