Nicole Lutes, a partner in a regional public accounting firm, is conducting the independent technical review—the "cold" review—of working papers for the December 31, 1999, year end audit of Singer Corporation. In 1996, two years before Lutes was admitted to the partnership, she was the audit manager on the Singer engagement. One of the working papers, a schedule of ratios and an analysis of account balance changes from 1998 to 1999, reveals that advertising expense, stated at \($150,000\) on December 31, 1998, increased to \($180,000\) in 1999, an increase of \($30,000,\) or 20 percent. Sales and cost of goods sold in both years were relatively stable. Lutes reviews a working paper schedule, "Analysis of Advertising Expense," which reveals that for \($20,000\) of the 1999 advertising expense balance, the audit staff examined advertising copy and invoices and traced payments to the cash disbursements records. Interim tests of controls indicated that control procedures over advertising transactions are not particularly reliable. The working papers provide no explanation of the \($30,000\) increase in advertising.

Required:

1. Explain the purpose of an independent technical review of working papers.

2. Is Lutes a reasonable choice to perform the 1999 independent technical review given that she was the manager on the 1996 Singer Corporation engagement? Explain.

3. In your judgment, were the nature and scope of the audit of advertising expense reasonable? Explain.