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Damaris Shaffer

MIS 562

Week 2, Chapter 2 & 3 Homework

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a. U.S. generally accepted auditing standards

b. International Standards on Auditing

c. PCAOB auditing standards

d. PCAOB auditing standards

e. PCAOB auditing standards

f. U.S. generally accepted auditing standards

g. International Standards on Auditing

h. PCAOB auditing standards

INTERNET PROBLEM 2-1

a. The objective of the IAASB is to serve the public interest by setting high international standardsfor auditing and assurance. Moreover, their objective is to promote consistency in global

auditing and strengthen the publics confidence in the profession. IAASB is used by professional

accountants.

b. The due process followed by the IAASB in setting standards comprises of the following six steps:1. Setting the agenda

2. Planning the project

3. Developing and publishing the discussion paper

4. Developing and publishing the exposure draft

5. Developing and publishing the standard

6. After the standard is issued post-implementation review is performed by the IAASB

c. The IAASB is committed to transparency in the standard-setting process by having an EducationCommittee and Ethics Committee which promotes transparency. Also, to increase transparency

the IAASB invites speakers and to present to the IAASB, encourages communication with

academia, audit oversight organizations, training organizations and small business associations.

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a. Conditions requiring modification of each of the six situations:1. Because the Oil Refining Company is now doing oil drilling in the last three months that is a

risky business and could affect their profits. Therefore, the auditor should qualify their

opinion or provide a disclaimer.

2. Because Mr. Harrison Automotive has made changes to how they due depreciation fromstraight line to sum-of-the years digits, which will affect future years is material and should

be in a unqualified report with details on how it will impact its revenue and finances.

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3. Because Toronto has not included cash flow statements the auditor should put a disclaimerin because the GAAP required a cash flow statement.

4. Because Marseilles Fragrance Inc parent company is based in New York and have locationsin Europe, both US and international audit standards should be followed.

5. Because Brentwood Industries will not allow us to confirm the receivable balance of twomajor customers, the auditor should issue a qualified report.

6. Even though 20% of Lumberton Farms Inc was done by another CPA firm proficiently, youshould still have a disclaimer report stating that fact.

b. The level of materiality of each of the situations:1, 3, and 5 are highly material

2 is material

4 and 6 are immaterial

c. The type of report required for each of the situations:2 requires unqualified report with explanatory paragraph

1 and 6 require a disclaimer report

3 requires a qualified report5 requires a qualified scope and work

4 requires a unqualified report standard working

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1. a 2. e 3. d

4. b 5. c 6. g

7. i 8. f 9. h

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a.

The seven key elements of audit report and explanation on whether it was covered by theAuditing of Les Meridians financial statement:

Report Titlethe word independent was use and that is a plus

Audit Report Addressthis report only addresses the shareholders when it should have

addressed the company, stockholders and Board of directors.

Introductory Paragraphthe auditor specifies that they have done an audit of the financial

statements instead of just a review. The auditor should have listed the period of the accounting

period that they audited.

Opinion paragraphthe auditor expresses their opinion on whether the statements are

according to the GAAP.

Name and Address of the CPAthe address is listed in the audit report

Date of Audit Report

the date is listed in the report

b. The elements in the audit report based on International Standards on Auditing that aremore extensive than an audit report based on U.S. auditing standards is the element that

states that management is still responsible for internal controls and risk assessment.