Assignment #2 Integrated Audit Practice Case

1. AICPA auditing standards require a discussion among the engagement team about the susceptibility of the financial statements to material misstatement. What are some of the purposes of this discussion?

2. The auditor reviews important financial statement numbers and ratios at both the beginning and the completion of the audit. Compare and contrast the purposes of (1) preliminary analytical procedures and (2) analytical procedures performed near the completion of the audit.

3. When you identified income statement fluctuations in steps (e) and (f) of this assignment, which information did you find most helpful comparisons of the current years and prior years balances, or comparisons of the current years and prior years balances as a percentage of sales? Explain.

4. The auditor should consider the results of analytical procedures performed in planning the audit that indicate possible implausible or unexpected relationships in assessing the risk of fraud. For example, if the auditor compares revenue reported by product line each month (i.e., monthly sales volume) with sales (or production) capacity, and determines that the number of items reported as sold exceeds capacity, then the auditor should be concerned that revenue may be materially overstated due to fraudulent revenue transactions. What other types of unexpected relationships, ratios, or trends might suggest an increased risk of fraud? Discuss any relationships, ratios, or trends you identified in this assignment that might represent an increased fraud risk.

5. The clients going concern status is an audit reporting issue that is addressed at the conclusion of the audit. Auditing standards require the auditor to assess whether the client is likely to continue in existence for a reasonable period of time after the date of the financial statements. Indicate reasons why the auditor should also assess the companys going concern status in the planning stage of the audit.