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Evaluate the following quotation: ―If a CPA firm completes a
nonpublic company audit of Adam Company’s financial statements
following AICPA generally accepted auditing standards and is
satisfied with the results of the audit, an unmodified audit report may
be issued. On the other hand, if no audit is performed of the current
year’s financial statements, but the CPA firm has performed
satisfactory audits in prior years, has confidence in the management
of the company, and makes a quick review of the current year’s
financial statements, a qualified report may be issued.‖
Do you agree? Give reasons to support your answer.
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Reed, CPA, accepted an engagement to audit the financial statements
of Smith Company. Reed’s discussions with Smith’s new
management and the predecessor auditor indicated the possibility that
Smith’s financial statements may be misstated due to the possible
occurrence of errors, fraud, and illegal acts.
a. Identify and describe Reed’s responsibilities to detect Smith’s
errors and fraud. Do not identify specific audit procedures.
b. Describe Reed’s responsibilities to detect Smith’s material
noncompliance with laws. Do not identify specific audit procedures.
c. Identify and describe Reed’s responsibilities to report Smith’s
noncompliance with laws.
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AC 410 Unit 2 Homework Assignment
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