The objectives of a review in accordance with the statements on standards for accounting differ significantly with those of audit financial statements in compliance with the general accepted auditing standards. During a review the accountants will perform analytical procedures and will obtain their information from asking the management a variety of questions rather than obtaining an understanding of the internal control structures and obtaining evidential matter throughout inspection, observation or confirmation as an audit process requires.
Upon completion of the process the accountants will issue an opinion providing limited assurances on the fair presentation of the financial statements.
This limited assurance opinion is different from an audit opinion as it provides a lower level of assurance. Sources used: AR section 60: Professional Standards (www. aicpa. org), AU Section 150: Generally Accepted Auditing Standards (www. pcaobus. org)
In my opinion, auditor obtained third-party confirmations, reviewed available documentation, analytical procedures performed to evaluate the reasonableness of the revenues recorded on the contracts and the visited selected restoration sites are more reliable than management assertion of occurrence.
Management assertions can be purposely misleading and the individuals might go to a great length to defraud the auditors and the public.
In the ZZZZ Best Companies case, Barry Mirkov asserts that all financial statements are properly presented and when the auditors decide to take further auditing procedures, Barry Mirkov creates fraudulent contracts, rents real estate spaces for a few hours and hires a few phony individuals to pose as leasing agents in order to accompany auditors in their observational visits of the restoration sites, utilizing millions of dollars and affectively convincing auditors that there is no need for further investigation.
The ZZZZ Best situation proves that con artists may succeed even against the most intelligent auditors and drives me to conclude that even evidence gathered from third-parties and other credible sources can be fraudulent and unreliable. AU Section 330: The Conformation Process (www. pcaobus. org) defines the conformation process and the steps taken in the procedure to confirm from third-parties that the financial statements are correct and the assertion made by management regarding the statements is reliable and truthful. In my opinion, Mr.
Greenspan should have had more professional skepticism when auditing the ZZZZ Company. Relying solely on the payment for the jobs can be misleading considering how the transactions may be fictitious. Mr. Greenspan’s gathered evidence may be considered persuasive but in my opinion it is not conclusive. Key fraud indicators such as the contract number being larger the nationwide number, large contracts occurring prior to stock offerings and that all the contracts were agreed by the same parties should have raised a number of red flags for anyone performing the audit.
I think Mr. Greenspan was lead to an improper conclusion by relying on what is considered reliable evidence but can clearly be fraudulent and manipulated to influence the decision of the auditor. Mr. Greenspan should have gathered a variety of evidence and not relied solely on the payment for the jobs. AU Section 316 explains the responsibility an individual providing the audit has: to obtain reasonable assurance about whether the financial statements are free of material misstatement. Exercise professional skepticism) AU Section 230: Due Professional Care in the Performance of Work explains that the auditor must exercise due professional care in the performance of the audit and the preparation of the report. The purpose of the predecessor-successor auditor communications is to provide the successor with information that may assist the auditor in his decision in whether to accept the engagement or not. The party responsible for initiating these communications is the successor auditor.
The successor auditor should obtain any information concerning the integrity of the management, any disagreements that management might have with accounting principles, auditing procedures, communications to audit committees regarding illegal acts by clients and responsibility of regarding fraud and the understanding as to the reasons for the change of auditors by the predecessor. Source used: AU Section 315: Communications Between Predecessor and Successor Auditors (www. pcaobus. org)
In my opinion, the confidentiality agreement that Minkow required Ernst & Whinney to sign improperly limits the scope of the ZZZ Best audit. Attempts to impose restrictions on the audit team by asking them to agree to not contact contractors, insurance companies, building owners and/or any individuals involved in the restoration contract limits the actions that can be taken to provide evidence that the contracts are legit and forces auditors to only rely on the assertions of the management.
Confidentiality concerns by the client concerning information not available to the public, or information about new products, information that will give an advantage to a competitor should be respected and should strictly be an issue discussed between the auditor and the client only. It is concerning when the client attempts to leave only him/herself as a credible source which can be contacted to verify assets, liabilities, transactions, accounts that have a great importance to the fairness of the financial statements because it is the process of limiting the scope of the audit and it directly affects the type of audit opinion issued.
The Confidential client information rule shall not be constructed to relieve a member from his/her professional obligations as stated by bodies of Council. Source used: ET Section 301-Confidential Client Information (www. aicpa. org) In my opinion, there are no requirements by professional standards for the auditor to perform regarding a client’s pre-audit and post-year-end earnings press release. It would be wise for the management to consult the auditor first and the auditor may have advice for the management concerning the earnings press release.
The Audit Committee of the Board of Directors Charter states that the audit committee has as a responsibility a duty to have a review with the financial manager and the independent auditor quarterly or annually before the public release of earnings where it will discuss the type of information that should be disclosed to the public but t059883739031987he lack of evidence proving that there is a procedure required by the professional standards leads me to the opinion stated above.
Cite this Objectives of a Review and Audit Financial Statements: ZZZZ Best Company, Inc
Objectives of a Review and Audit Financial Statements: ZZZZ Best Company, Inc. (2019, May 02). Retrieved from https://graduateway.com/objectives-of-a-review-and-audit-financial-statements-zzzz-best-company-inc-2-1404/