1. Valuation – could have gone to site to check if the projects were recording appropriate revenue Existence – needed to check if the projects actually existed by talking to appropriate workers
EXISTENCE AND OCCURRENCE were the biggest one, presentation/disclosure and completeness 2. Sullivan did a bad job checking and did not apply the proper controls. He identified the project as a high risk engagement, but did not do any of the necessary audit procedures to remedy this. Therefore, there was an audit failure. Sullivan was not completely at fault as it was fraud so people at Golden Bear were purposefully committing a white collar crime, but he should have exposed it by forcing them to disclose any changes in valuation techniques, as well as make them be more accurate with their revenue valuation. Did not follow-up. Because something bad happened, Sullivan was not solely responsible, others would include audit manager, concurring partner, and management. Maybe team doesn’t know what they were doing. 3. If it is a high-risk engagement, you have to do more audit work to decrease the audit risk. Otherwise don’t take on the engagement. Can bring in experts. 4. These guides probably do not override the Statements on Auditing Standards, but Audit and Accounting guides probably do provide a much better understanding for specific industries, and if you are not knowledgeable, they could be very useful in providing the info needed to audit specific companies in certain industries. There are audit guides for each kind of industry. Explains how accounting works. Boring to read, but very informative. 5. Changing the accounting method to percentage of completion was a change in the accounting principle. A change in accounting principles, accounting estimates, or the reporting entity. A change in an accounting principle is a change in a method used, such as using a different depreciation method or switching from LIFO to FIFO. An example of an accounting estimate...
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