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ADVANCED AUDITING Competency XXXXXXXXXX: Assurance, Attestation, and Internal Auditing - The graduate knows the different types of engagements performed by CPAs and the standards that apply to each....

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ADVANCED AUDITING
Competency XXXXXXXXXX: Assurance, Attestation, and Internal Auditing -The graduate knows the different types of engagements performed by CPAs and the standards that apply to each.


Task 2
Introduction:

A well-executed audit provides value to a company by offering assurance on financials and other information. In this task, you will apply your knowledge of the different types of audit and review services to assist your client in making an informed decision. You will also explain relevant professional standards to use in the audit.
Scenario:
As a newly promoted manager at a regional CPA firm, Freedom Rock Accounting (FRA), you have been assigned to work with a new client, Mallory Construction, Inc. Mallory is owned by 5 local residents. The company borrowed $650,000 for working capital and equipment from a local bank 2 years ago. Loan covenants require an annual review of Mallory Construction Inc.’s financial statements by an independent accounting firm. For each of the past 2 years, Mallory has paid approximately $25,000 per year for a review.
Mallory Construction, Inc. is planning to expand into a new market later this year. In preparation for the expansion, Mallory’s owners have discussed the need for increased working capital and equipment. The senior team believes an additional $500,000 will be needed over the next 12 months. It is unclear whether the current lender would be willing to loan the additional money to Mallory. The company may seek additional equity investment, with or without additional financing. Senior management is considering having FRA perform an audit of the financial statements, instead of the review. None of the current management team members have experience with financial statement audits.
Requirements:
Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual source can be directly quoted or closely paraphrased from sources, even if cited correctly. Use the Turnitin Originality Report available in Taskstream as a guide for this measure of originality.
You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course.

A. Write a professional letter (suggested length of 3−5 pages) to help the Mallory Construction audit committee make an informed decision about which service would be more appropriate in which you do the following:

1. Compare what an audit service and a review serviceeachentails.

a. Discuss the responsibilities of the provider of an audit service.

b. Discusstwobenefits of an audit service.

c. Discuss the responsibilities of the provider of a review service.

d. Discusstwobenefits of a review service.

e. Recommend either an audit service or a review service to the Mallory Construction audit committee.

i. Justify your recommendation.

2. Explaintworelevant professional standards for a financial statement audit.

3. Explaintworelevant professional standards for a review service.

B. Acknowledge sources, using in-text citations and references, for content that is quoted, paraphrased, or summarized.

Note: Specific citation of accounting rules is not required.

WEB LINKS:
1.WJT Task 2 Rubric
Answered 51 days AfterOct 09, 2017Swinburne University of Technology

Solution

David answered on Nov 30 2017
33 Votes
Student Name:
Advanced Auditing
Institute Name:
Affiliation:
Table of Contents
A. Assurance, Attestation, and Internal Auditing    2
A1. Comparison of audit service and review service    2
A1a. Responsibilities of audit service provider    2
A1b. Benefits of audit service    3
A1c. Responsibilities of review service provider    3
A1d. Benefits of review service    4
A1e. Recommendation to committee    4
A2. Financial statement audit standards    5
A3. Review service standards    5
B. References    7
17th October 2017
To
The Audit Committee
Mallory Construction, Inc.
From
The Manage
Freedom Rock Accounting
A. Assurance, Attestation, and Internal Auditing
A1. Comparison of audit service and review service
An audit service denotes the assurance that a CPA provides on the quality of financial statements in terms of the true and fair view of the same. The process of audit signifies that the auditor will provide an opinion as to whether the financial statements have been prepared in accordance with the generally accepted accounting principles (GAAP) in the country. Review service, on the other hand, provides a limited assurance about the compliance, disclosure, treatment and thus, overall quality of financial statements. A review engagement, therefore, offers significantly less assurance than that of an audit engagement. However, it may be noted that both the engagements follow the methodologies such as analytical procedure, evaluation of internal control over financial reporting (ICFR) and other controls to substantiate the required level of assurance on the financial statements.
A1a. Responsibilities of audit service provide
The responsibilities of an auditor include the planning and performing the audit procedure to check whether the financial statements are in conformity with the GAAP. An auditor needs to express an opinion on the fairness of the financial statements in all respect, financial position, results of operations and even the cash flows of the business.
In this context, it may be noted that an auditor is considered to be “watchdog and not a bloodhound”. In other words, it is not the responsibility of an auditor to certify the financial statements to be co
ect. Auditor relies largely on the representation made by the engagement and performs the audit procedure to gather sufficient audit evidence to establish his opinion on the fairness of the accounts. While executing the role, the auditor must use “professional skepticism” to determine nature, extent, and timing of audit...
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