Audit Reviews: Ernst and Whinney and ZZZZ Best Company

1. An Audit differs from a review, particularly in terms of the level of assurance by an auditor. An Auditor’s report must obtain reasonable assurance about whether the financial statements as a whole, are free of material misstatement, whether it’s due to fraud or error. An Auditor expresses his opinion on whether the financial statements are prepared in accordance with an applicable financial reporting framework. As well as, to report on the financial statements and Auditors findings that relates to GAAS. When an Auditor obtains the financial statements, he begins to evaluate the evidence, by checking if the assets exist, recorded revenue transaction have occurred, the lists of liabilities is complete, he assert that the statements are fairly presented.
When an Auditor chooses to issue a review report, he may choose not to give an opinion in regards to the financial statements. An Auditor will collect the financial statements but will not investigate further and gather evidence in order to support the numbers given in the financial statements. This type of review report does not provide enough assurance that is needed in order to have a better understanding made by management. In the case of ZZZZ Best, Minkow retained Ernst & Whinney to perform the following year’s audit. However, instead of performing an Audit, they decided to provide a review of the company’s financial statements for the three-month period ending July 31, 1986. They chose not to perform an audit because they did not want to provide an opinion regarding the financial statements as a whole.

2. In order for Minkow to convince Ernest & Whinney that his insurance restoration contracts were real, he decided to bring in a third party. The third party posed as leasing agents of a Property Management Firm, which allowed them access to the building. They were able to set up a “stage,” on the building’s site to look like ZZZZ Best was the contractor for the building renovation. So