Describe how professional skepticism plays into this type of audit
Question Description
Part 1
Length: One-half page
You have just finished your yearly audit of a publicly traded corporation. Describe how you would handle each of the following scenarios:
Scenario 1
a)Describe why there is a big emphasis placed on auditing cash and cash equivalents. Address the following:
b)Why is this area more susceptible to fraud?
Scenario 2
While doing an audit, you discover inconsistencies in the company’s expenses. Address the following:
a)Why might a company choose to overstate or understate its expenses?
b)How might this be accomplished?
c)Describe how professional skepticism plays into this type of audit.
Scenario 3
a)Why is auditing inventory more complex than auditing other asset accounts?
Scenario 4
When an auditor is trying to determine if the financial statements are reported fairly,
a)how might a summary of potential adjustments help the auditor and
b)what information would it give them?
Part 2
Length: One-half page
After the audit, the auditor will need to complete reports that attest to your findings. Answer the following questions about your audit findings:
- List the 5 primary financial statement audit reports and explain when they are used.
- Are comparative reports required by Generally Accepted Accounting Principles (GAAP)?
- With nonpublic companies, audits are not required, but they are often requested. This results in reviews and compilations.
- What is included in a review?
- What is included in a compilation?
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