Auditing 4

One - half page

Key Assignment Draft

You have just finished your yearly audit of a publicly traded corporation. Describe how you would handle each of the following scenarios:

Part 1

Scenario 1

Describe why there is a big emphasis placed on auditing cash and cash equivalents. Address the following:

• Why is this area more susceptible to fraud?

Scenario 2

While doing an audit, you discover inconsistencies in the company’s expenses. Address the following:

1. Why might a company choose to overstate or understate its expenses?
2. How might this be accomplished?
3. Describe how professional skepticism plays into this type of audit.

Scenario 3

Why is auditing inventory more complex than auditing other asset accounts? Address the following:

• What are the three audit tests that can be applied to inventory, and how do the internal controls play into it?

Scenario 4

1. When an auditor is trying to determine if the financial statements are reported fairly, how might a summary of potential adjustments help?
2. What information would a summary of the client's potential adjustments give to the auditor?

Part 2

Deliverable Length: One-half page

After the audit, the auditor will need to complete reports that attest to your findings. Answer the following questions about your audit findings:

1. List the 5 primary financial statement audit reports and explain when they are used.
2. Are comparative reports required by Generally Accepted Accounting Principles (GAAP)?
3. With nonpublic companies, audits are not required, but they are often requested. This results in reviews and compilations.
4. What is included in a review?
5. What is included in a compilation?