You have been assigned by your CIA firm to complete the audit of the financial statements of Hamilton Manufacturing Corporation because the senior auditor and his inexperienced assistant, who began the engagement, were hospitalized as the result of an accident. The engagement is about one-half completed. Your audit report must be delivered in three weeks, as agreed when your firm accepted the engagement. You estimate that by utilizing the client’s staff to the greatest possible extent consonant with independence you can complete the engagement in five weeks.

Your firm cannot assign an assistant to you.

Your working papers show the status of work on the examination as follows:

1) Completed – Cash, property and equipment, depreciation, mortgage note payable, and stockholders’ equity.

2) Completed except as noted later – Inventories, accounts payable, tests of controls over purchase transactions and payrolls.

3) Nothing done – Trade accounts receivable, inventory price testing, accrued expenses payable, unrecorded liability test, tests of controls over sales transactions, tests of controls over payroll deductions and observation of payroll check distribution, analysis of other expenses, analytical procedures, vouching of December purchase transaction, audit report, assessment of control risk, letter on reportable conditions, minutes, preparation of tax returns, subsequent events, and supervision and review.

Your review discloses that the assistant’s working papers are incomplete and were not reviewed by the senior accountant. For example, the inventory working papers present incomplete notations, incomplete explanations, and no cross-referencing.

Required:

a. What field work standards have been violated by the senior accountant who preceded you on this assignment? Explain why you think the standards you list have been violated.

b. In planning your work to complete this engagement, you should scan working papers and schedule certain work as soon as possible and also identify work that may be postponed until after the audit report is rendered to the client.

1. List the areas on which you should plan to work first, say in your first week of work, and for each item explain why it deserves early attention.

2. State which work you believe could be postponed until after the audit report is rendered to the client, and give reasons why the work may be postponed.

Answer rating: 100% (QA)

standards GAAS are a set of systematic guidelines used by auditors when conducting audits on companies financial records GAAS helps to ensure the accu... View the full answer