Professor Eric. E. Spires
Richard Ansley, Yuting Cai, Jeong Yeon Kim, Tianyu Zhu Date:
Meteor Technologies, Case One
The audit of Meteor Technologies in 1989 completed by Gilmore Bennington and Peter Zalenti of W&P had many egregious errors. Three major issues in this case will be stated and analyzed firstly. * W&P auditors’ failure to obtain competent evidence to develop a reasonable opinion. * The lack of mental independence by the auditors, especially W&P partner Bennington. This was evident in Bennington’s lack to challenge the Meteor’s CFO on issues presented by the auditing team. * Throughout the audit process, W&P failed to exercise due care in their performance of professional services. Professional skepticism was not able to be finally exercised due to ethical pressure. As stated above, the general standards of GAAS were not met during this audit. First, Evidence was lacking or insufficient in the majority of decisions made by Bennington. Bennington failed to ensure competent evidence when accepting Meteor’s appraisal value of SJA at $1.5 million. It was worth noting that W&P used a copy of draft agreement rather than the final version to assess the advances of SJA. With low completeness and certainty, the draft should not have been used as a competent evidence for auditing. A similar situation occurred in ST-100 inventory evaluation. Bennington took Meteor’s CFO opinion on how to handle the reserves for the ST-100 inventory without receiving any documentation to defend the adjustment. Meteor’s CFO also provided their attorney’s opinions regarding the collectability of their bad debt in regards to the sale of ST-100 array processors. While these opinions provided evidence to the collectability of the bad debts, it did not provide enough information to accept the much lower adjustment suggested by Meteor’s CFO. Most issues of insufficient evidence obtained by auditors were related to...
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