Litigation Support Review of Audit Essay
The Runners Shop ( TRS ) was a household owned concern founded seventeen old ages ago. TRS sold athletic footwear and related merchandises for smugglers. TRS had four retail locations located in Charlottesville. Virginia ; Richmond. Virginia ; College Park. Maryland ; and Cary. North Carolina. TRS had Net Gross saless of $ 2. 217. 292 and a Net Loss of $ 50. 980 for 2004. TRS filed for bankruptcy protection in July of 2005 because of a hard currency deficit.
The hard currency deficit resulted from TRS’s inability to turn a net income. after four old ages of operations. with its three enlargement shops ( Richmond. Virginia ; College Park. Maryland ; and Cary. North Carolina ) . TRS was required to hold an audit of its fiscal statements to carry through demands of its loan understandings with First Commercial Bank and National Bank and Trust. Both imparting establishments lost their outstanding loan balances when TRS filed for bankruptcy.
The one-year fiscal statements of TRS were audited by Green and Brown. LLP for the last 10 old ages. Green and Brown. LLP issued a standard unqualified sentiment for TRS’s 2004 fiscal statements. The two loaning establishments jointly filed a case against Green and Brown. LLP avering that it did non execute the audit in conformity with by and large accepted auditing criterions. The jurisprudence houses stand foring the suspect and the complainants are presently carry oning find processs.
Use OF CASE
Many pupils will hold small construct of the aims and intents for documenting the audit work performed. This assignment works good in an undergraduate or alumnus class when audit certification is discussed. It is recommended that pupils complete this assignment prior to working on other assignments necessitating the readying of audit certification.
A utile attack with this assignment is to reexamine the aims of each audit plan measure with pupils prior to inquiring them to finish the assignment “out-of-class. ” More specifically associating audit stairss to direction averments. This exercising reminds pupils that the audit work ( and scrutinize certification ) should back up each direction averment. A worksheet for this “in-class” activity is provided at the dorsum of the instructional notes.
A really lively category treatment tends to happen when pupils are asked to place lacks they found with the audit certification. This treatment provides an first-class chance to foreground the importance of good audit certification ( i. e. . how apparently minor errors. non relevant to a supposed audit failure. can in hindsight do a good hearer look incompetent ) . Some of the big public accounting houses have moved off from paper to electronic certification of audit work. The nature of the alterations in how audit work is being documented and the deductions of these alterations can easy be incorporated into the treatment of this instance.
Concerted acquisition activities can easy be adapted to this assignment. One activity for the preliminary “in-class” treatment would be Drill-Review Pairs ( Pairs-Check ) . Students pair together and one pupil explains the direction averment for the first audit process while the other pupil checks the reply. The Roles for the following audit process are reversed. the reply checker for the first audit process explains the direction averment while the reply supplier checks the reply. This basic procedure is continued until all processs are answered. The teacher should walk around the category to guarantee pupils remain on undertaking. The concerted acquisition activity of Homework Review can be used for the “out-of-class” assignment. Students meet in little groups to compare and discourse lacks they identified by agenda. After pupils have had a few proceedingss to compare and discourse their replies the teacher can randomly name on single pupils to place lacks they noted.
Relevant professional criterions for this assignment are AU Section 230 “Due Care in the Performance of Work. ” AU Section 326 “Evidential Matter. ” AU Section 330 “The Confirmation Process. ” and AU Section 339 “Audit Documentation. ”
1. Describe the intents of audit certification and explicate why each intent is of import.
Properly prepared audit certification should supply 1 ) a footing for be aftering the audit. 2 ) a record of grounds collected and consequences of trials performed on the grounds. 3 ) a footing for finding the appropriate audit study and 4 ) a footing for reappraisal by supervisors of the work performed. Accomplishment of these four intents aids the hearer in supplying sensible confidence that the audit was conducted in conformity with the auditing criterions.
2. Review Green and Brown. LLP’s audit certification guidelines and explicate why an audit house would desire to include each of the listed points in its audit certification.
The guidelines provided provide the undermentioned benefits: Title – Having a proper rubric helps persons reexamining the agenda to rapidly place the client and agenda intent. Source – Clearly placing the beginning of a agenda helps to see that appropriate testing of client prepared papers occurs and facilitates be aftering for the following audit period. Work Performed – Clearing identifying who performed the work facilitates finding of follow-up inquiries that arise every bit good as planning for the following audit period. Indexing – Using a logical referencing system facilitates registering for subsequently reappraisal every bit good as cross-referencing information between agendas. Tickmark – Providing accounts of the significance of tickmark insures that the specific work performed is clearly documented.
3. Review the audit certification prepared by Green and Brown. LLP. related to TRS’s Notes Payable and list lacks on the enclosed agendas.
A solution to the assignment is documented on a agenda similar to the agenda provided to pupils on the pages that follow. Note that a tabular array associating audit processs to direction averments is besides provided.
4. Green and Brown. LLP would non be required to follow with the auditing criterions of the Public Company Accounting Oversight Board ( PCAOB ) for the TRS audit because TRS is a private company. Puting this fact aside for the minute. travel to the PCAOB Web site and reexamine Standard No. 3. “Audit Documentation” ( see hypertext transfer protocol: //www. pcaobus. org/Standards/index. asp ) . This standard requires that certification of audit work contain sufficient information to enable an experient hearer non involved with the battle to accomplish two aims. What are those two aims? Explain whether you believe the audit certification in this instance achieves these aims.
The PCAOB “Audit Documentation” criterion requires that the certification be sufficient for an experient hearer who had no association with the battle be able to 1 ) understand the nature. timing. extent and consequences of the processs performed. grounds obtained and decisions reached and 2 ) determine who performed the work and the day of the month such work was completed every bit good as the individual who reviewed the work and the day of the month such reappraisal occurred.