ACC 401 Week 1

Test Bank

Assignment

Week 1 Assignment - Problem 2-32

Generally Accepted Auditing Standards. Complete problem 2-32 (p. 59) and submit to your instructor. Write under the generally accepted auditing standards column the specific standard that was violated and how the action of Jones resulted in a failure to comply with each standard. Organize your answer as shown on page 59; specifically with a column for the standard that was violated and a column for the required action. The paper should be 2-3 pages.

Problem 2-32 (p. 59):

John Clinton, owner of Clinton Company, applied for a bank loan and was informed by the banker that audited financial statements of the business had to be submitted before the bank could consider the loan application. Clinton then retained Arthur Jones, CPA, to perform an audit. Clinton informed Jones that audited financial statements were required by the bank and that the audit must be completed within three weeks. Clinton also promised to pay Jones a fixed fee plus a bonus if the bank approved the loan. Jones agreed and accepted the engagement.

The first step taken by Jones was to hire two accounting students to conduct the audit. He spent several hours telling them exactly what to do. Jones told the students not to spend time reviewing controls but instead to concentrate on proving the mathematical accuracy of the ledger accounts and summarizing the data in the accounting records that support Clinton Companys financial statements. The students followed Jones instructions and after two weeks gave Jones the financial statements, which did not include any notes. Jones reviewed the statements and prepared an unqualified audit report. The report, however, did not refer to generally accepted accounting principles.

Required:

List on the left side of a sheet of paper the generally accepted auditing standards that were violated by Jones, and indicate how the actions of Jones resulted in a failure to comply with each standard.

Discussion Questions

Internal vs. External Audit Staffs. Complete 1-12 (p. 26). Remember to complete all parts of the problems. Do not forget to show the necessary steps and explain how you attained that outcome.

Audit Reports. Complete 2-7 (p. 56). Remember to complete all parts of the problems. Do not forget to show the necessary steps and explain how you attained that outcome.