ZZZZ Best Company, Inc Case
A review is performed to obtain a reasonable basis for providing limited assurance that the client's financial statements have been prepared in conformity with generally accepted accounting principles. An independent audit is designed to provide a reasonable basis for expressing an opinion concerning whether or not a client’s financial statements have been prepared in accordance with generally accepted accounting principles. There is also a major difference between a review and an audit in terms of the scope of work performed. When a review is done, the main evidence collection techniques are analytical procedures and inquiries of client personnel. Whereas, in an audit, the full range of evidence collection techniques available to an auditor is likely to be used. A review does not assess control risk, tests of accounting records and responses to inquiries by obtaining validating evidence through inspection, observation or any other audit procedure. It can point out significant matters of the financial statements but does not provide assurance of their accuracy. Because reviews are generally not as rigorous as audits, considerably less evidence is typically collected in a review than in a comparable audit engagement. The issue with ZZZZ Best case is that the auditors review was not sufficient enough to review any material misstatements on the financial statements.
Third party confirmations should give consistent evidence in support of assertions made by management. Usually the truthfulness of the evidence depends on the relationship between the client and the third party. In accordance to AU Section 326.25 “To the extend the auditor remains in substantial doubt about any assertion of material significance, he or she must refrain from forming an opinion until he or she has obtain sufficient competent evidential matter to remove such substantial doubt, or the auditor must express a...