ZZZZ Best Company, Inc: An Analysis
ZZZZ Best Company Inc.
Introduction
This paper explores the ZZZZ Best Company which was begun by a 16 year old individual who was able to pull the wool over the eyes of many customers, investors and auditors. This paper will define the difference between review and audit when it comes to financial reports, comments on the procedures provided with regard to the management assertion of occurrence, verification of payments for jobs and how they can lead auditors to improper conclusion, the purpose of predecessor-successor auditor communications, as well as whom needs to initiate the communication and information that needs to be obtained. The paper also addresses the limitations of the confidentiality agreement and how and when client-imposed audit scope limitations affect the type of audit opinion used as well what procedures professional standards require auditors to perform when reviewing a client's pre-audit report and post-year-end earnings press release. Accuracy, honesty and integrity are both keys to the success in auditing and following the rules of GAAP are a must for all those involved.
Analysis
In this case, the auditing firm Ernst & Whinney only issued a review report, which gives a limited assurance that the financials are accurate. According to CPA James Ulvog, (2006), “An audit report provides more assurance to a reader of the financial statements than a review or compilation”(para 14). There are numerous differences between performing a review and actual audit on the financial statements, but the major one is that the review does not contemplate obtaining an understanding of internal control structure. In addition, a review does not assess control risk, tests of accounting records, determine fraud risk, nor responds to inquiries by obtaining corroborating 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
Introduction
This paper explores the ZZZZ Best Company which was begun by a 16 year old individual who was able to pull the wool over the eyes of many customers, investors and auditors. This paper will define the difference between review and audit when it comes to financial reports, comments on the procedures provided with regard to the management assertion of occurrence, verification of payments for jobs and how they can lead auditors to improper conclusion, the purpose of predecessor-successor auditor communications, as well as whom needs to initiate the communication and information that needs to be obtained. The paper also addresses the limitations of the confidentiality agreement and how and when client-imposed audit scope limitations affect the type of audit opinion used as well what procedures professional standards require auditors to perform when reviewing a client's pre-audit report and post-year-end earnings press release. Accuracy, honesty and integrity are both keys to the success in auditing and following the rules of GAAP are a must for all those involved.
Analysis
In this case, the auditing firm Ernst & Whinney only issued a review report, which gives a limited assurance that the financials are accurate. According to CPA James Ulvog, (2006), “An audit report provides more assurance to a reader of the financial statements than a review or compilation”(para 14). There are numerous differences between performing a review and actual audit on the financial statements, but the major one is that the review does not contemplate obtaining an understanding of internal control structure. In addition, a review does not assess control risk, tests of accounting records, determine fraud risk, nor responds to inquiries by obtaining corroborating 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