Auditing: Financial Audit and Auditors Reports Date

The CPA firm should not issue an unqualified opinion based on these circumstances. The unpaid accounting fees may cause the CPA firm to have doubts about the client’s ability and willingness to pay for its services. As a result, the CPA firm’s judgment may be influenced by these doubts, and it may not be able to properly evaluate the client during the audit in a manner that is unbiased and impartial. Instead, the CPA firm should issue a qualified opinion that discloses the potential lack of independence caused by the past due billing. It is essential for CPAs to follow the standards of independence so that they maintain a reputation of integrity among the public (Dodaro, 2013).

I. A CPA leaving a firm may take copies of information contained in client files to assist another firm in serving that client.

What additional audit procedures, if any, should you suggest to the engagement partner in order to evaluate the appropriateness of the asbestos litigation liability as of December 31, 2009?

1. Combining profitable business with meaningful opportunities helping clients maintain quality of life. Contribution of staff and how well the operation of business is performed and the efficiency, and the effectiveness of services needed to patients reliability of assistance and their autonomy.

3. Considering your response to questions 1 and 2, do you believe that the going- concern uncertainty was warranted? Do you believe that Deloitte & Touche should have issued a going- concern opinion prior to 2008?

Mary is in a position where she would have access to the client’s financial statements, business plans, and future obligations the firms would be engaged with. If she shared any of this information then the firm’s independence would have been impaired. At this time we feel we need to eliminate any risk of our CPA firm. We need to temporally make sure Mary is not a covered member for any attest clients.

The firm’s accounts receivable ratio increased from 68.71 in 2006 to 74.56 in 2010. This means that it is taking Abbott almost six days longer to collect from its customers today than it did five years ago. Furthermore, the firm’s accounts payable days has decreased from 43.72 in 2006 to 38.22 in 2010. This means that Abbott is paying its suppliers 5½ days earlier today than it did in 2006. A change in the inventory ratio from 8.01 in 2006 to 11.03 in 2010 indicates that it is taking the firm longer to sell finished goods than it used to. The increase in the accounts receivable and inventory ratios, combined with a decrease in the accounts payable ratio, indicates poor working capital management and helps to explain why the firm has increased its holdings of cash and short-term investments. To correct this, Abbott’s managers should focus on collecting cash from its customers faster and delaying payments to its suppliers. To maximize its cash position, the firm would be best served by paying its suppliers in the same amount of time as it collects payment from its customers.

b. Describe the implications of the resulting ratios for the auditor’s audit strategy in year 5. What specific audit objectives are likely to be misstated? How should the auditor respond in terms of potential audits tests?

3. What potential implications arise for the accounting firm if they issue an unqualified report without the going-concern explanatory paragraph?

Following the risk assessment procedures, substantive procedures are designed and conducted to detect material misstatements of relevant assertions. Substantive procedures include analytical procedures and tests of details. Analytical procedures involve evaluations of financial statement information by a study of relationships among financial and nonfinancial data. Tests of details may be divided into three types. One test is the test of account balances to address whether there are misstatements in the ending balance of an account. In the case of Crazy Eddie, auditors should have put greater attention to inventory and accounts payable accounts. The second test is a test of classes of transactions to determine whether particular types of transactions have been properly accounted for during the period. Crazy Eddies fraudulently classified these transshipping transactions as retail sales to inflate its sales revenue and continue growth at existing stores. A key ratio for retailers is to compare growth in existing stores to growth from new stores. The third and final test is a test of disclosures to evaluate whether financial statement disclosures are properly presented. Crazy Eddie prepared bogus debit memos of over $20 million to understate accounts payable.

When the business has more work than it can handle is another warning of the enterprise not doing well. A lack of liquidity can also be a cause of business failure. Liquidity is the speed at which an asset can be converted into cash and if the company does not have enough liquid cash at its disposal, it can lead to their downfall. A new business venture that provides products or services at the cheapest price in a desperate quest for making sales is also a sign of struggle.

Bunni, N (1986). Publisher; Spoon Press, Place of Publication; London. Risk and insurance in construction. 2nd ed, p215.

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

And the company is suffering from liquidity challenges because it is not in a position to finance its day-to-day activities, so its bank account stands over drawn. This situation has impacted negatively on the company's ability to repay its earlier loans and customers are upset because of delayed delivery.

This article initiates with the introduction on what is audit planning. It basically addresses the audit plan strategy of K & S Corporation limited’s Financial Statements. Being an external auditor of the company, key factors to be considered in auditing the financials of the subject company have been discussed in the article. The most significant accounts at risk being materially misstated have been critically examined citing the possible risks associated with such accounts. Last but not the least, the article concludes with recommendations with respect to audit assessment plan of the company. Hence, this article seeks to act as a ready reckoner guide for an audit manager in audit planning of K & S Corporation Limited.