While you are having lunch with a banker friend, you become involved in explaining to him how your firm conducts a typical audit. Much to your surprise, your friend is interested and is able to converse intelligently in discussing your philosophy of emphasizing the importance of internal control, analytical procedures, tests of controls, substantive tests of transactions, and tests of details of balance sheet accounts.
At the completion of your discussion, he says, “That all sounds great except for a couple of things. The point of view we take these days at our bank is the importance of a continuous earnings stream. You seem to be emphasizing fraud detection and a fairly stated balance sheet. We would rather see you put more emphasis than you apparently do on the income statement.”
How would you respond to your friend’s comments?