Best Case Questions

2 February 2017

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. 3. SAS 106 (AU 326), Audit Evidence, specifically identifies the principal management assertions that underlie financial statements.The existence/occurrence assertion was particularly critical for ZZZZ Best’s insurance restoration contracts. ZZZZ Best’s auditors obtained third-party confirmations to support the contracts, reviewed available documentation, performed analytical procedures to evaluate the reasonableness of the revenues recorded on the contracts, and visited selected restoration sites. * What were the limitations of the evidence that these procedures provided with regard to the management assertion of existence/occurrence? 8 points) The limitations of the evidence that these procedures provided with regard to the management assertion of existence/occurrence was that Minkow insisted on Ernst & Whinney to sign a standard confidentiality agreement where it stated that Ernst & Whinney will not be able to make any follow-up telephone calls to any contractors, insurance companies, the building owner, or other individuals involved in the restoration contract.

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This restriction effectively prohibited the auditors from corroborating the insurance restoration contracts with independent third parties.

4. George Greenspan testified before Congress that one method he used to audit the insurance restoration contracts was to verify that his client actually received payment on those jobs. * How can such apparently reliable evidence lead an auditor to an improper conclusion? (6 points) In Greenspan’s situation, his apparently reliable evidence was not from independent third party.When Greenspan confirmed the existence of ZZZZ’s insurance restoration contracts, he contacted Tom Padgett who at the time was an active and willing participant in Minkow’s fraudulent schemes. 5. Re: Predecessor-successor auditors: * What is the purpose of predecessor-successor auditor communications? * Which party, the predecessor or successor auditor, has the responsibility for initiating these communications?The successor auditor should obtain information from the predecessor auditor that will assist the successor auditor in determining whether to accept the engagement. Matters subject to the inquiry should include information that might bear on the integrity of management, disagreements with management as to accounting principles, auditing procedures, or similarly significant manners, communications to those charged with governance regarding fraud and illegal acts by clients, communications to management and those charged with governance regarding signi?

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