Accounting information systems controls and processes 3rd edition

Case 7 - 64

Ryan McGuire is an auditor for a large CPA firm. McGuire was recently

assigned to perform a financial statement audit of Kraft Brewery,

Inc., a brewery and distributor of German specialty foods. McGuire's

firm is auditing Kraft for the first time. The audit is nearly

complete, but it has required more time than expected. The auditors

who performed the planning and testing phases have now been assigned

to another client engagement, so McGuire was called in to carry out

the completion / reporting phase.

In discussing the details of the audit engagement with the original

audit team, McGuire learned that the original team expected that an

unqualified audit opinion would be issued. This expectation was based

on the extent of audit evidence accumulated, which led to the belief

that the financial statements were fairly presented in accordance with

GAAP.

Harold Stebbines, Kraft's CFO, is unhappy about the change in audit

personnel. He is threating to refuse to furnish a letter of

representation.

Required:

a.Would it be appropriate for McGuire to reopen the audit testing

phases in order to expand procedures, in light of the lack of

representative evidence from management? Why, or why not?

b.Will McGuire's firm still be able to issue an unqualified audit

report if it does not receive the representation letter? Research the

standard wording to be included in an unqualified audit report, as

well as the typical wording included in a client representation

letter. Base your answer on your finding.